GAPPUMAL KANAHIYALAL Vs. COMMISSIONER OF INCOME-TAX, UNITED AND CENTRAL PROVINCES

JUDGEMENT

(1.) A Hindu family known as Gappumal Kanhaiya Lal of Ranimandi, Allahabad, (hereafter referred to as the asses-see) was assessed to income-tax upon income derived from house property in the occupation of tenants. The assessee claimed that it was not liable to income-tax on a sum of Rs. 13,500 paid by it to the municipality on account of house-tax and water-tax. Its claim was disallowed by the Income-tax Appellate Tribunal which has prepared a statement of the case and referred the following four questions to us under the provisions of Section 66 (1), Income-tax Act: (1) Whether, in determining the bona fide annual value of a property under Sub-section (1) read with Sub-section (2) of Section 9, Income- tax Act, 1922, the amount of house-tax imposed by the Municipal Board of Allahabad under el. (i) of Sub-section (1) of Section 128, U.P. Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of the latter Act, should be deducted from the gross amount payable as rent by the tenant of that property? (2) Whether the amount of house-tax imposed by the Municipal Board of Allahabad under el. (i) of Sub-section (1) of Section 128, U.P. Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of that Act should be deducted as an allowance from the bona fide annual value of the property determined under Sub-section (1) read with Sub-section (2) of Section 9, Income-tax Act, 1922, on the ground that such amount is an annual charge, which is not a capital charge, to which the property is subject within the meaning of Clause (iv) of Sub-section (1) of Section 9, Income-tax Act, 1922? (3) Whether, in determining the bona fide annual value of a property under Sub-section (1) read with Sub-section (2) of Section 9, Income- tax Act, 1922, the amount of the water-tax imposed by the Municipal Board of Allahabad under Clause (x) of Sub-section (1) of Section 128, U.P. Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of the latter Act, should be deducted from the gross amount payable as rent by the tenant of that property? (4) Whether the amount of water-tax imposed by the Municipal Board of Allahabad under Clause (x) of Sub-section (1) of Section 128, U.P. Municipalities Act, 1916, and paid by the owner as a lessor under Section 149 of that Act should be deducted as an allowance from the bona fide annual value of the property determined under Sub-section (1) read with Sub-section (2) of Section 9, Income-tax Act, 1922, on the ground that such amount is annual charge, which is not a capital charge, to which the property is subject within the meaning of el. (iv) of Sub- section (1) of Section 9, Income-tax Act, 1922?

(2.) The gist of the matter is that the assessee maintains: (1) that the amounts paid on account of house-tax and water-tax are not part of the annual value of the property within the meaning of Section 9, Income-tax Act; (2) that the amounts paid on account of these taxes should be deducted from the annual value of the property under Section 9 (1) (iv) of the Act as annual charges not amounting to capital (charges; and (3) that the water-tax is a payment for water supplied to the tenant and that the part of the rent which is paid away as water-tax is no part of the landlord's income but merely passes through his hands (on its way from the real payer to the payee.

(3.) As the last point concerns only one of the taxes I will deal with it first. I agree with the Tribunal that the water-tax is a true tax and not a payment for water supplied. The proceeds of the tax are employed in supplying water at least within certain limits of amount to the whole community. Nobody is deprived of water because he is not assessed to the tax. Mr. Kunzru for the assessee has argued that owners of premises with a water-connexion are assessed at a rate of 10 l/8 per cent, on the annual value while owners of other premises are assessed at a rate of 6 3/4 per cent., but this, in my judgment, is merely a method of assessment which does not imply that the occupier of the premises pays only for the water which he uses. The higher rate is based doubtless on the fact that a person occupying a house with a water-connection has opportunities of taking greater advantage of the common supply but the amount of tax does not depend upon the amount of water used. The tax will not be reduced because the occupier prefers, for instance, to draw all his water direct from the Ganges. My conclusion is that the assesses} has failed to establish his third point.