Case: The New Piecegoods Bazar Co., Ltd.,Bombay Vs. The Commissioner Of Income-Tax,Bombay

(2) The assessee company is an investment company deriving its income from properties in the city of Bombay. For the assessment year 1940-41, the net income of the assessee under the head "property" was computed by the Income-tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the relevant year Rs.122,675 as municipal property tax and Rs. 32,760 as urban property tax. Deduction of these two sums was claimed under the provisions of S. 9 of the Act. Out of the first item, a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants burdens paid by the assessee, otherwise the claim was disallowed. The appeals of the asseseee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were unsuccessful. The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely, - (1) Whether the municipal taxes paid by the applicant company are an allowable deduction under the provisions of S. 9 (1) (iv), Income-tax Act; (2) Whether the urban immovable property taxes paid by the applicant-company are an allowable deduction under S. 9 (1) (iv) or under S. 9 (1) (v), Income -tax Act.(3) A supplementary reference was made covering a third question which was not raised before us and it is not therefore necessary to refer to it. The High Court answered all the three questions in the negative and hence this appeal.

Reasoning: (14) In Commissioner of Income-tax Bombay v. Mohomdbhoy I. A. Rowji, Beuumont C. J., while rejecting the claim for the deduction of the taxes, placed reliance on S.9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue. It was observed that land revenue stands on the same footing as municipal taxes and that as the Legislature made a special provision for deduction of sums payable in regards to land revenue but not in respect of sums paid on account of municipal taxes that circumstances indicated that the deduction was not allowable. For the same purpose reference was also made to the provisions of S. 10 which deal with business allowances and wherein deduction of any sum paid on account of land revenue, local rates or municipal taxes has been allowed. In the concluding part of his judgment the learned Chief Justice said that it was not necessary for him to consider what the exact meaning of that words was and that it was sufficient for him to say that, it did not cover municipal taxes, which are made a charge on the property under S.2, Bombay Municipal Act. Without determining the exact meaning of the words used by the statute, it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a Court is to give effect to the intention of the Legislature as expressed in the words used by it and to outside consideration can be called in aid to find that intention. Again reference to cl. (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so a deduction in respect of the amount was mentioned in express terms. Municipal taxes on the other hand do not stand on the same footing as land revenue. The law as to them various from provided to province and they may not be necessarily a charge on property in all cases. The Legislature seems to have thought that so far as municipal taxes no property are concerned. If they fall within the ambit of cl. (iv),deduction will be claimable in respect of them but not otherwise. The deductions allowed in S. 10 under the head income from business" proceed on a different footing and a construction of S. 9 was the aid of S. 10 is apt to mislead.(15) Kania J. in the above case in arriving at his conclusions on was influence by the consideration that these taxes were of a variable character i.e. liable to be increased or reduced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge. With great respect it may be pointed out that all charge in a way may be or are of a variable and contingent nature. If no default as made no charge is ever enforceable and whenever there is a charge, it can be increased or reduced during the year either by payment or by additional borrowing.(16) In Moss Empires Ltd. v. Inland Revenue Commissioners it was held by the House of Lords that the fact that certain payments were contigent and variable in amount did not affect their character of being annual payments and that the word "annual must be taken to have the quality of being recurrent or being capable of recurrence.(17) In Cunards Trustees v. Inland Revenue Commissioners, it was held that the payments were capable of being recurrent and were therefore annual payments within the meaning of Sch. D, case III, R. 1 (i), even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial. The learned Attorney-General in view of these decisions did not support the view expressed by Kania, J.(18) Reliance was placed on a decision of the High Court of Madras in Mamad Keyi v. Commissioner of Income-tax, Madras, in which moneys paid as urban immovable property tax under the Bombay Finance Act were disallowed as inadmissible under S. 9(1)(iv) or 9(1)(v), Income-tax Act. This decision merely followed the view expressed in Commissioner of Income-tax, Bombay v. Mahomedbhoy, I. A. Rowji, and was not arrived at on any independent or fresh reasoning and is not of much assistance in the decision of the case. The Allahabad High Court in Gappumal Kanhaiya Lal v. Commissioner of Income-tax, (the connected appeal) took a correct view of this matter and the reasoning given therein has ourIn Commissioner ofBombay v. Mohomdbhoy I. A. Rowji, Beuumont C. J., while rejecting the claim for the deduction of the taxes, placed reliance on S.9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue. It was observed that land revenue stands on the same footing as municipal taxes and that as the Legislature made a special provision for deduction of sums payable in regards to land revenue but not in respect of sums paid on account of municipal taxes that circumstances indicated that the deduction was not allowable. For the same purpose reference was also made to the provisions of S. 10 which deal with business allowances and wherein deduction of any sum paid on account of land revenue, local rates or municipal taxes has been allowed. In the concluding part of his judgment the learned Chief Justice said that it was not necessary for him to consider what the exact meaning of that words was and that it was sufficient for him to say that, it did not cover municipal taxes, which are made a charge on the property under S.2, Bombay Municipal Act. Without determining the exact meaning of the words used by the statute, it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a Court is to give effect to the intention of the Legislature as expressed in the words used by it and to outside consideration can be called in aid to find that intention. Again reference to cl. (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so a deduction in respect of the amount was mentioned in express terms. Municipal taxes on the other hand do not stand on the same footing as land revenue. The law as to them various from provided to province and they may not be necessarily a charge on property in all cases. The Legislature seems to have thought that so far as municipal taxes no property are concerned. If they fall within the ambit of cl. (iv),deduction will be claimable in respect of them but not otherwise. The deductions allowed in S. 10 under the head income from business" proceed on a different footing and a construction of S. 9 was the aid of S. 10 is apt to mislead.