COMMISSIONER OF INCOME-TAX Vs. MAHOMEDBHOY I A ROWJI

JUDGEMENT

(1.) 1. This is a reference made by the Commissioner of Income-tax under Section 66(2), Indian Income-tax Act, 1922, raising the question : Whether under the provisions of Section 9 of the Act the assessee is entitled to a deduction of Rs. 16,370, being the municipal general tax paid to the Bombay Municipality in respect of the immoveable property belonging to him?

(2.) SECTION 9 of the Indian Income-tax Act deals with the heading "Income from property," and directs that the tax shall be payable by an assessee under that head in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, subject to certain allowances. The only allowance, which, it is suggested, applies to this case, arises under Sub-clause (iv), which was amended in the year 1939. The sub-clause reads :

(3.) I do not find it very easy to say what is the meaning of "an annual charge." The words in their most natural significance would mean a charge arising annually. But charges as a rule do not arise annually. The words, I think, would cover a charge to secure an annual liability, and in that sense it is argued that this tax is an annual charge. It is to be noticed that the charge only comes into existence when default is made in payment of tax, and naturally ceases as soon as the payment is made. So that the charge is unlikely to endure for a year, since the liability is unlikely to exist for a year. Whether it can be said that this is an annual charge may be doubtful, but it seems to me plain that it cannot be described as "annual charge not being a capital charge." I do not know what meaning can be assigned to the expression in the Sub-section "a capital charge," except a charge on capital, though it is not necessary to consider the meaning of the expression except in relation to the charge arising under Section 212 of the Municipal Act. To my mind, such a charge is unquestionably a charge on capital, and, in my view, therefore, one cannot say that the general tax falls within the expression "an annual charge not being a capital charge,"which has been added to Section 9(1)(iv). It is said that those words were added by virtue of the Privy Council decision in Bijay Singh Dudhuria v. Commissioner of Income-tax, Calcutta (1933) I.L.R. 60 Cal. 1029; but if that be so, I think the Legislature must have misunderstood that decision. All that the Privy Council decided in that case was that where a person was entitled to income, and had to pay out of that income an annuity to his father's widow, that annuity was a charge on income, which had in effect priority to his own title, and, therefore, income which was payable to the father's widow never became the income of the assessee liable to assessment under the Act. That case was not dealing with allowances.