Express Newspapers Pvt. Ltd. vs Commissioner of Income Tax

Ramanujam, J.—The assessee seeks a direction from this court, directing the Tribunal to refer the following three questions :

(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that urban land tax levied on the

assessee during the year is not allowable but that only the amount paid during the year is deductible u/s 24(1)(vii) in computing income from

property ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the income from hire charges

of printing machinery and motor vehicles derived by the assessee is assessable under the head ""Other sources"" and not under the head ''Business''

?

(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sums of Rs. 4,59,396 and

Rs. 2,862 representing interest provided in respect of moneys borrowed by the assessee and written back in the accounts of the assessee are

chargeable to tax as income u/s 41(1) of the Income Tax Act, 1961 ?

So far as the first question is concerned, the contention of the assessee is that he is entitled to the deduction towards urban land tax liability in the

year in which the demands have been issued. It is not in dispute that in this case, though the demand was issued in the relevant assessment year,

payment has not been made. The assessee seeks deduction of the urban land tax demanded in the assessment year, contending that there is an

accrual of liability as soon as the demand is issued and, therefore, it is deductible in the year in question. It has been held in Commissioner of

Income Tax Vs. M. Ct. Muthiah, , that so far as the liability towards urban land tax is concerned, deduction can be claimed only in the year of

payment, for s. 24(1)(vii) of the I.T. Act contemplates a deduction being given only in respect of the sums paid on account of urban land tax levied

by the State. The learned counsel for the assessee contends that the said decision has not been rendered on a proper understanding of the scope of

the provision in s. 24(1)(vii) and that in any event the decision in Commissioner of Income Tax Vs. M. Ct. Muthiah, , is the subject-matter of a

SLP before the Supreme Court and, therefore, the question can be taken to be at large. According to the learned counsel for the assessee, s.

24(1)(vii) deals with two categories, (1) land revenue, and (2) any other tax levied, and the payment is contemplated only in the matter of land

revenue and so far as any other tax is concerned, the date of demand should be taken as the basis for deduction. According to the learned counsel

for the assessee, the expression ""any sums paid on account of"" qualifies only land revenue and not other tax levied by the State Government and,

therefore, the deduction in respect of land revenue can be claimed only on payment, but in respect of any other tax the liability will accrue earlier on

the date of demand. We are not in a position to agree with the learned counsel for the assessee in his interpretation of clause (vii) of s. 24(1). If the

interpretation sought to be placed by him on the said provision is accepted, it will mean that clause (vii) provides in respect of land revenue the

actual payment as the basis and in respect of other taxes the accrual as the basis for deduction. A harmonious construction of the said provision

will be to construe the expression ""any sums paid on account of"" as qualifying not only land revenue but also any other tax levied by the State

Government. We cannot assume that the Legislature intended that payment should be taken as the basis only in respect of land revenue but in

respect of any other tax accrual should be taken as the basis. We are of the view that the provision contemplates the payment as the basis both in

respect of the land revenue as well as imposition of other taxes. In this view of the matter, we do not see any justification for taking a view

differentfrom the one taken in Commissioner of Income Tax Vs. M. Ct. Muthiah, . In this view, we do not think there is any justification for

direction a reference on question No. 1, especially when such a question has already been answered by this court in the above case.

So far as questions Nos. 2 and 3 are concerned, we feel that those questions arise out of the order of the Tribunal. Hence, we direct the

Tribunal to state a case and refer questions Nos. 2 and 3 for the opinion of this court. The reference application in so far as question No. 1 is

concerned, is dismissed. No costs.