MOHAN MEAKIN BREWERIES LIMITED Vs. COMMISSIONER OF INCOME TAX NO 1

JUDGEMENT

(1.) IN this reference, the INcome-tax Appellate Tribunal has referred the following question to us for our opinion :

(2.) THE facts which gave rise to this reference are that during the financial year 1964-65 relevant to the assessment year 1965-66, the Lucknow Branch of the assessee, which is a public limited company, paid Rs. 13,338 on account of Bhumi Bhawan Kar which is a tax imposed by the U. P. Government under Uttar Pradesh (Nagar Kshettra) Bhumi Aur Bhawan Kar Adhiniyam, 1962, in respect of the land and buildings used for the purposes of its business. THE said Adhiniyam is hereafter referred to as "the U.P. Act." Section 3 of the Act provides that there shall be charged, levied and paid for each year a tax on lands or buildings, or both, situate in an urban area at such rate or rates, not exceeding twenty-five per cent. of the taxable value of the land or building, as the State Government may by notification in the Gazette declare in this behalf. According to Section 5 of that Act, the tax payable in any year in respect of any land or building or part thereof, where the owner himself is not the occupier of the same, shall be recoverable by the owner from the occupier of the land or the building, in the same proportion as the number of days during the year for which such land or building or portion thereof, as the case may be, has been in actual occupation or use of such occupier, bears to the figure 365. Sub-section (2) of Section 5 further provides that tax payable under Sub-section (1) may be recovered by the owner from the occupier along with the rent or damages for use and occupation of the land or the building, as the case may be, or otherwise.

(3.) THE Tribunal has held that since the amount of tax in dispute is not the tax imposed by a local authority, Section 30(b) of the Income-tax Act, 1961, has no application and, therefore, deduction on that account cannot be granted to the assessee. THE Tribunal then proceeded to consider the provisions of Section 37(1) of the I.T. Act, 1961, and relied upon the decision given by the Punjab and Haryana High Court in CIT v. Jai Hind Picture Co. (P.) Ltd. [1973] 87 ITR 218 and came to the conclusion that since under the U.P. Act the tax was required to be paid on account of the assessee's ownership or occupation of the land and premises, it is not possible to say that the expenditure on account of this tax was laid out by the assessee wholly and exclusively for the purpose of its business. According to. the Tribunal, the , assessee was bound to pay the tax in question even if it did not carry on its business activities in the land and premises in question.