dedol-hf/india-case-legal-rag huggingface dataset:
and  the amount of such charge should therefore be  deducted
in computing the income from such property for the  purposes
of s. 9 of the Indian Income-tax Act.
    The charge  in respect of urban immoveable property  tax
created  by  the Bombay Finance Act, 1939.,  is  similar  in
character  and  the  amount of such  charge  should-also  be
deducted.
    The  expression "capital charge" in s.9(1) (iv) means  a
charge  created for a capital sum,that is to say,  a  charge
created to.' secure the discharge of a liability of a  capi-
tal nature; and an
"annual charge" means a charge to secure an annual  liabili-
ty.
554
JUDGMENT:
    APPELLATE   JURISDICTION:   Civil  Appeal  No.  LXVI  of
1949.
    Appeal from the High Court  of judicature, Bombay, in  a
reference  under  section 66 of the Indian  Income-tax  Act,
1022.
    K.M.  Munshi (N. P. Nathvani, with him), for the  appel-
lant.                            '
    M.C.  Setalvad,   Attorney-General  for   India  (H.  J.
Umrigar, with him), for the respondent.
    1950.  May 26.  The judgment of the Court was  delivered
by
    MEHR  CHAND  MAHAJAN  J.--This is an  appeal  against  a
judgment  of  the High Court of Judicature at Bombay  in  an
income-tax matter and it raises the question whether munici-
pal  property tax and urban immoveable property tax  payable
under  the  relevant Bombay Acts  are  allowable  deductions
under section 9 (1) (iv) of the Indian Income-tax Act.
    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. 1,22,675 as municipal property tax and Rs.  32,760
as  urban  property tax.  Deduction of these  two  sums  was
claimed under the provisions of section 9     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 disal-
lowed.   The, appeals of the assessee to the  Appellate  As-
sistant Commissioner and to the Income-tax Appellate  Tribu-
nal  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
555
the  provisions of section 9 (1) (iv) of the Indian  Income-
tax Act;
    (2) Whether the urban immoveable property taxes paid  by
the  applicant-company  are  an  allowable  deduction  under
section 9 (1) (iv) or under section 9 (1) (v) of the  Indian
Income-tax Act.
A  supplementary  reference was made  covering  a  third
question which was not raised before us and it is not there-
fore necessary to refer to it.  The High Court answered  all
the three questions in the negative and hence this appeal.
    The question for our determination is whether the munic-
ipal  property tax and urban immoveable property tax can  be
deducted  as an allowance under clause (iv)  of  sub-section
(1)  of  section 9 of the Act.  The decision  of  the  point
depends firstly on the construction of the language employed
in  sub-clause (iv) of sub-section (1) of section 9  of  the
Act,  and secondly, on a finding as to the true  nature  and
character  of the liability of the owner under the  relevant
Bombay Acts for the payment of these taxes.
    Section 9 along with the relevant clause runs thus:--
      (1) The tax shall be payable by an assessee under  the
head  '  income from property' 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  the  following  allowances,
namely :-
    (iv)  where  the property is subject to  a  mortgage  or
other  capital  charge, the amount of any interest  on  such
mortgage  or  charge; where the property is  subject  to  an
annual  charge  not being a capital charge, the.  amount  of
such charge; where the property is subject to a ground rent,
the amount of such ground rent; and, where the property  has
been  acquired,  constructed, repaired,  renewed  or  recon-
structed  with borrowed capital, the amount of any  interest
payable on such capital;  .............  "
    It  will be seen that clause (iv) consists of four  sub-
clauses corresponding to the four deductions allowed
556
under  the clause.  Before the amending Act of 1939,  clause
(iv)  contained  only  the first, third  and  fourth    sub-
clauses.  Under the first sub-clause interest is  deductible
whether the amount borrowed on the security of the  property
was  spent on the property or not.  There is no question  of
any  capital  or  other expenditure on  the  property.   The
expression "capital charge" in the sub-clause cannot connote
a  charge  on the capital, that is, the  property  assessed.
That  would be a redundancy as the opening words  themselves
clearly indicate that the charge is on the property.  We are
therefore  of  opinion that capital charge here  could  only
mean  a charge created for a capital sum, i.e., a charge  to
secure the discharge of a liability of a capital nature.
   In  1933  the  Privy Council decided the  case  of  Bijoy
Singh.  Dudhuria v. Commissioner of Income-tax, Calcutta  (1
).  It was not an assessment under section 9 but an  assess-
ment on the general income of an assessee who was liable  to
pay  maintenance for his step-mother which had been  charged
on  all his assets by a decree of Court.  It was not  a  li-
ability  voluntarily incurred by him but one cast on him  by
law.  The Privy Council held that the amount paid by him  in
discharge  of  that  liability formed no part  of  his  real
income  and  so should not be included  in  his  assessment.
Though  the  decision proceeded on the  principle  that  the
outgoings were not part of the assessee's income at all, the
framers  of the amending Act of 1939 wanted, apparently,  to
extend  the principle, so far as the assessment of  property
was  concerned, even to cases where obligatory payments  had
to  be made out of the assessee's income from  the  property
charged  with  such  payments, and  the  second  sub-clause,
namely, "where the property is   subject to an annual charge
not  being a capital charge, the amount of such charge"  was
added.  It is this sub-clause which the appellant invokes in
support  of  its  claim to deduction of  the  municipal  and
urban,  property taxes in the present case. In view  of  the
opening words of the newly added sub-clause, the  expression
"capital charge" also used therein cannot have reference  to
a charge on the property, and we think it must
(1) I.L.R. 60 cal. 1029.
557
be  understood in the same sense as in sub-clause (1);  that
is  to say, the first sub-clause having provided for  deduc-
tion  of  interest  where a capital sum is  charged  on  the
property, this sub-clause provides for a deduction of annual
sums  so  charged,  such sums not being  capital  sums,  the
limiting words being intended to exclude cases where capital
raised on the security of the property is made repayable  in
instalments.
    In  Commissioner  of Income-tax,  Bombay  v. Mahomedbhoy
Rowji  (1), a Bench of the Bombay High Court considered  the
meaning  of these words.  As regards "annual charge,"  Beau-
mont C.J. observed as follows :--
    "The  words, I think, would cover a charge to secure  an
annual liability."
Kania J., as he then was, said as follows :--
    "I do not see how a charge can be annual unless it means
a charge in respect of a payment to be made annually."
    This construction of the words has been followed in  the
judgment under appeal.
In  Gappumal Kanhaiya Lal v. Commissioner of  Income-tax
(2)  (the  connected  appeal before us), the  Bench  of  the
Allahabad High Court agreed with the construction placed  on
these  words  in the Bombay case, i.e.,  the  words  "annual
charge" mean a charge to secure an annual liability.  It  is
therefore clear that there is no conflict of judicial  deci-
sions as to the meaning of the phrase "annual charge" occur-
ring  in  section 3 (1) (iv) and the meaning  given  is  the
natural meaning of these words.
    As to the phrase "capital charge", Beaumont C.J. in  the
case  above referred to took the view that the words mean  a
charge on capital.  Kania J., however, took a different view
and observed that he was not prepared to accept the  sugges-
tion that a document which provides for a certain payment to
be  made  monthly  or annually  and  charged  on  immoveable
property  or the estate of an individual becomes  a  capital
charge. In the Allahabad judgment under appeal these
(1) I.L.R. 1943 Bom. 628.          (2) I.L.R. 1944 All. 780.
558
words  were considered as not meaning a charge  on  capital.
It  was  said  that if an annual charge means  a  charge  to
secure  the discharge of an annual liability, then,  capital
charge means a charge to secure the discharge of a liability
of a capital nature.  We think this construction is a  natu-
ral construction of the section and is right.
    The  determination  of the point whether  the  taxes  in
dispute  fall within the ambit of the phrase "annual  charge
not being a capital charge" depends on the provisions of the
statutes  under  which they are levied. Section 143  of  the
City of Bombay Municipal Act, 1888, authorises the levy of a
general  tax  on all buildings and lands in  the  city.  The
primary  responsibility to pay this property tax is  on  the
lessor  (vide section 146 of the Act).  In order  to  assess
the tax provision has been made for the determination of the
annual  rateable  value of  the  building in  section   154.
Section  156 provides for  the maintenance of an  assessment
book in which entries have to be made every official year of
all  buildings in the city, their rateable value, the  names
of persons primarily liable for payment of the property  tax
on such buildings and of the amount for which  each building
has  been assessed.  Section 167 lays down that the  assess-
ment  book  need  not be prepared every  official  year  but
public  notices shall be given in accordance  with  sections
160  to 162 every year and the provisions o+ the  said  sec-
tions  and of sections 163 and 167 shall be applicable  each
year.   These  sections  lay down a  procedure  for  hearing
objections and complaints against entries in the  assessment
book.  From these provisions it is clear' that  the  liabil-
ity  for  the tax is  determined at the beginning  of   each
official  year and the tax is an annual one. It recurs  from
year  to year.  Sections 143to 168 concern  themselves  with
the imposition, liability and assessment of the tax for  the
year.  The amount of the tax for the year and the  liability
for  its payment having been determined, the Act  then  pre-
scribes for its collection in the chapter "The collection of
taxes." Section 197 provides that each of the property taxes
shall be payable in
559
 advance  in  half yearly instalments on each first  day  of
April  and  each first day of October. The provision  as  to
half  yearly instalment necessarily connotes an  annual  li-
ability. In other words, it means that the annual  liability
can  be  discharged by half yearly payments.  Procedure  has
also  been  prescribed for recovery of  the  instalments  by
presentment of a bill, a notice of demand and then distress,
and sale. Finally section 212 provides as follows :--
    "Property  taxes  due under this Act in respect  of  any
building or land shall, subject to the prior payment of  the
land  revenue,  if any, due to  the  provincial  ,Government
thereupon, be a first charge  ........  upon the said build-
ing or land  ....  "
It creates a statutory charge on the building. Urban immove-
able property tax is leviable under section 22 of Part VI of
the Bombay Finance Act, 1932,on the annual letting value  of
the  property.  The duty to collect the tax is laid  on  the
municipality  and  it does so in the same manner as  in  the
case  of the municipal property tax.  Section 24 (2) (b)  is
in terms similar to section 212 of the Bombay Municipal Act.
It  makes the land or the building security for the  payment
of  this  tax also.  For the purposes of section  9  of  the
Indian Income-tax Act both these taxes, namely, the  munici-
pal  property tax as well as the urban  immoveable  property
tax   are of the same character and stand on the same  foot-
ing.
   Mr.  Munshi, the learned counsel for the  appellant  con-
tended that both the taxes are assessed on the annual  value
of  the land or the building and are annual taxes,  although
it may be that they are collected at intervals of six months
for  the sake of convenience, that the income-tax itself  is
assessed on an annual basis, that in allowing deductions all
payments made or all liabilities incurred during the  previ-
ous year of assessment should be allowed and that the  taxes
in  question fell clearly within the language of  section  9
(1)  (iv). The learned Attorney-General, on the other  hand,
argued that although the taxes are assessed for the year the
liability to pay them arises at the beginning
560
of  each half year and unless a notice of demand  is  issued
and  a bill presented there is no liability to pay them  and
that till then no charge under section 212 of the Act  could
possibly  arise  and that the liability to  pay  being  half
yearly  in advance, the charge is not an annual charge.   It
was  also suggested that the taxes were a capital charge  in
the  sense of the property being security for  the  payment.
We are satisfied that the contentions raised by the  learned
Attorney-General  are  not sound.  It is apparent  from  the
whole tenor of the two Bombay Acts that the taxes are in the
nature  of an annual levy on the property' and are  assessed
on  the annual value of the property each year.  The  annual
liability can be discharged by half yearly instalments.  The
liability  being an annual one and the property having  been
subjected  to it, the provisions of clause (iv) of  sub-sec-
tion  (1)  of section 9 are  immediately  attracted.   Great
emphasis  was laid on the word"due" used in section  212  of
the  Municipal Act and it was said that as the taxes do  not
become  due  under the Act unless the time for  the  payment
arrives,  no charge comes into existence till then and  that
the  charge is not an annual charge.  We do not  think  that
this  is  a correct construction of section 212.  The  words
"property taxes due under this Act" mean property taxes  for
which  a  person  is liable under the  Act.   Taxes  payable
during  the  year have been made a charge on  the  property.
The liability and the charge both co-exist and are co-exten-
sive.   The provisions of the Act affording  facilities  for
the  discharge  of the liability do not in  any  way  affect
their true nature and character.  If the annual liability is
not  discharged in the manner laid down by section 197,  can
it be said that the property cannot be sold for recovery  of
the  whole  amount due for the year ?  The  answer  to  this
query can only be in the affirmative, i.e., that the proper-
ty is liable to sale.
    In  Commissioner  of Income-tax, Bombay  v.  Mahomedbhoy
Rowji(1)  Beaumont C.J., while rejecting the claim  for  the
deduction of the taxes, placed reliance on
(1)  I.L.R. 1943 Bom. 628.
561
section 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 regard to land revenue but  not
in  respect of sums paid on account of municipal taxes  that
circumstance indicated that the deduction was not allowable.
For  the same purpose reference was also made to the  provi-
sions of section 10 which deal with business allowances  and
wherein  deduction of any sum paid on account of land  reve-
nue,  local rates or municipal taxes has been  allowed.   In
the  concluding part of his judgment the learned Chief  Jus-
tice said that it was not necessary for him to consider what
the  exact meaning of the words was and that it  was  suffi-
cient  for him to say that it did not cover municipal  taxes
which are made a charge on the property under section 212 of
the  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 no outside consideration can be called in aid  tO
find  that intention. Again reference to clause (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 varies from province to province and they may not be
necessarily a charge on property in all cases.   The  legis-
lature seems to have thought that so far as municipal  taxes
on property are concerned, if they fall within the ambit  of
clause (iv), deduction will be claimable in respect of  them
but  not  otherwise.  The deductions allowed in  section  10
under the head "Income from business" proceed on a different
footing  and a construction of section 9 with   the  aid  of
section 10 is apt to mislead.
562
Kania J. in the above case in arriving at his conclusion
was influenced by the consideration that these taxes were of
a  variable character, i.e., liable to be increased  or  re-
duced 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  charges
in  a way may be or are of a  variable and  contingent   na-
ture.  If no default is 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.
    In Moss Empires Ltd. v. Inland Revenue Commissioners (1)
it was held by the House of Lords that the fact that certain
payments  were  contingent 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.
In Cunard's Trustees v. Inland Revenue Commissioners (2)
it  was held that the payments were capable of being  recur-
rent  and were therefore annual payments within the  meaning
of  schedule D, case III, rule 1 (1), 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.
    Reliance  was placed on a decision of the High Court  of
Madras   in  Mamad  Keyi  v.  Commissioner  of   Income-tax,
Madras(3), in which moneys paid as urban immoveable property
tax under the Bombay Finance Act were disallowed as inadmis-
sible  under section 9 (1) (iv) or 9 (1) (v) of  the  Indian
Income-tax  Act.  'This decision merely  followed  the  view
expressed in Commissioner of income-tax, Bombay v. Mahomedb-
hoy  Rowji (4)and was not arrived at on any  independent  or
fresh  reasoning and is not of much assistance in the  deci-
sion of the case. The Allahabad High Court
  (1)  [1937] A.C. 785.                 (2)  [1948] 1 A.E.R.
150.
  (3)   I.L.R.  1944 Mad. 399.            (4)   I.L.R.  1943
Bom. 628.
563
in  Gappumal Kanhaiya Lal v. Commissioner of  Incometax  (1)
(the  connected appeal) took a correct view of  this  matter
and the reasoning given therein has our approval.
    The  result is that this appeal is allowed and  the  two
questions  which  were  referred to the High  Court  by  the
Income-tax  Tribunal  and cited above are  answered  in  the
affirmative.   The appellants will have their costs  in  the
appeal.
Appeal allowed.
   Agent for the appellants:  M.S. Krishnamoorthi Sastri.
   Agent for the respondent:  P.A. Mehta.
PETITIONER:
COMMISSIONER OF AGRICULTURALINCOME-TAX, BENGAL
        Vs.
RESPONDENT:
SRI KESHAB CHANDRA MANDAL
DATE OF JUDGMENT:
09/05/1950
BENCH:
DAS, SUDHI RANJAN
BENCH:
DAS, SUDHI RANJAN
FAZAL ALI, SAIYID
SASTRI, M. PATANJALI
MAHAJAN, MEHR CHAND
MUKHERJEA, B.K.
CITATION:
 1950 AIR  265            1950 SCR  435
 CITATOR INFO :
 D          1955 SC 249  (5)
 R          1956 SC 604  (4,11,12)
ACT:
Bengal  Agricultural Income-tax Act, (IV of  1944).  es.
24,  57-Rules  under the Act, r. 11, Form No.  5--Return  of
illiterate  assessee --Declaration signed by pen of  son  of
assessee--Validity  of return-Signature by  Agent--Permissi-
bility--"Qui facit per alium facit "applicability of.
HEADNOTE:
    The  Rules framed under the Bengal Agricultural  Income-
tax Act, 1944, provided that the declaration in a return  of
income  had to be signed "in the case of an  individual,  by
the individual himself." A return of an illiterate assessee,
Keshab  Chandra  Mandal, was. signed in  the  vernacular  as
follows:  "Sri Keshab Chandra Mandal Ba: Sri  Jugal  Chandra
Mandal,"  the  latter being the son of  the  assessee.   The
Appellate  Tribunal referred to the High Court the  question
"whether  in the circumstances of the case, the  declaration
in  the form of return signed by the illiterate assessee  by
the pen of his son should be treated as properly signed  and
a valid return." The High Court answered the question in the
affirmative.   On appeal:
    Held, per FAZL ALl, PATANJALI SASTRI,  MUKHERJE and  DAS
JJ.  (MAHAJAN J.  dissenting)--that the Bengal  Agricultural
Income-tax  Act, 1944, and the Rules framed thereunder  con-
tained  provisions  indicating an intention to  exclude  the
common  law  rule qui tacit per alium tacit per  se  in  the
matter of affixing signature to the return of income made by
an assessee who was an individual, and, as it was abundantly
clear  on  the records that there was  no  physical  contact
between  the  assessee and the signature  appearing  on  the
return,  the  return was not properly signed and was  not  a
valid return.
    MAHAJAN  J--As  the question referred  was  whether  the
return  "signed by the illiterate assessee with the  pen  of
his  son" was valid, it must be assumed that there was  such
contact,  and as there was nothing whatsoever on the  record
to establish that the assessee did not touch the pen or  the
hand  of  the son when the signature was affixed,  the  High
Court  was right in answering the question in  the  affirma-
tive.
Judgment of the Calcutta High Conrt reversed.
55
436
JUDGMENT:
APPEAL from the High Court of Judicature at
Fort William: (Civil Appeal No. LXXXVIII of 1949.)
This was   an appeal from the judgment and order of the High
Court of Judicature at Calcutta dated 16th  September, 1948,
(G.  N. Das and R.P. Mookerjee JJ.) in a Reference  made  to
the  High Court under section 63 (1) of the Bengal  Agricul-
tural  Income-tax Act, 1944,  by the Appellate  Tribunal  of
Agricultural Income-tax, West Bengal.  The facts are set out
in the judgment.
K.P.  Khaitan  (B.  Sen, with him) for  the  appellant.  The
respondent was not represented.
1950. May 9.  The following judgments were delivered :--
DAs  J.--There  is no serious dispute as to'  the  facts
leading up to this appeal.  They are shortly as follows:
    In  response to a notice issued under section 24 (2)  of
the Bengal Agricultural Income-tax Act, 1944, the  assessee,
who is the respondent before us, submitted a return  showing
his total agricultural income for the assessment year  1944-
45 to be Rs. 335.  This return is dated the 3rd April, 1945,
and just below the declaration appears the following writing
in vernacular: