The appeal fails and is dismissed with costs v. Daruka

The assessee company is an investment company deriving the city of from properties the assessment year 1940-41 the net Bombay. income of the assessee under the head "property" was computed by the Income-tax Officer sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the releva year Rs. 1,22,675 as municipal property Rs. 32,760 two sums was claimed under the provisions of section 9 of the Act. Out of the first item a deduction in sum of Rs. 48,572 was allowed on the ground that this item represented tenants' burdens paid by the assesscc, the cl.aim was disallowed. The appeals of -0therwise the assessee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were un successful. The Tribunal, · however, · agreed to refer two questions of law to the High Court of Judicature at Bombay, namely,- · (1) Whether :;ipplicant-company are an an~wable deductio11 under the munic; ipal taxes pai(l by , S.C.R. SUPREME COURT REPORTS 555 the provisions of section . 9 ( 1) Income-tax Act ; (iv) of the Indian 1950 New Pi4cegoods Baz:ar Co.

Ltd. v. Commissioner of Incorne-t1J1<, Bombay MllMjan]. (2) Whether immoveable property the urban taxes paid by the applicant-company are an allowable deduction under section ? (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 therefore necessary 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 municipal property tax immovable pro and urban perty tax can b~ deducted as an alfowance under clause 9£ section 9 of the Act. The (iv) of sub-section (1) the construc ·decision of the point depends tion of the language employed (iv) of sub-section (1) of section 9 of the Act, and secondly, on a. finding as to the true nature arid character of liability of the owner under the relevant Bombay Acts for the payment of these taxes.

Section 9 along with the relevant clause firstly on sub-clause thus:- ( 1) The tax shall be pa, yable by an assessee "9. under the head in respect of from property' 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:- 'income (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, is subject amount of such charge ; where the property to a ground rent, rent: and, where the property has been acquired, constructed, reconstructed with borrowed repaired, capital, interest payable on such ~ap1ta : ......... . \ • II renewed or the amount of any the amount of such ground It will be seen that clause clauses corresponding (iv) consists of four sub the four deductions allowed 1950 New Piectgoods Bazar Co.

Ltd. v. Commissionn of /n1;omt-tax, Bombay Mahajma]. 556 SUPREME COURT REPORTS [1950] the first, the clause. Before the amending Act of 1939, under the clause (iv) contained only third and fourth sub-clauses. Under the first sul>-clause interest is deduct the amount borrowed on the security of ible whether 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" sub-clause cannot connote a charge on the capital, that the property assessed. That would be a redundancy is, as the opening words the charge is on ·the property. We are therefore of only mean a opinion charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature. that capital charge here could themselves clearly indicate ). In 1933 It was not a liability voluntarily the amount paid by him the case of the Privy Council decided Biioy Singh Dud huria v.

Commissioner of Income-tax It was not an assessment under section 9 Calcutta (1 but an assessment 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. incurred by him but one cast on him by law. The Privy Council held that in discharge of that liability formed no part of his real income and should not be included in his assessment. Though deci, ion proceeded on the principle that the outgoings were not part of the assessee's the framers of the amending Act of 1939 wanted, extend the principle, the assessment of pro to cases where obligatory perty was concerned, payments had to be made out of the income assessee's from the property charged with such payments, namely, "where the property is the second subject to an annual charge not being a capital charge, the amount of such charge" was added. sul>-clause which the appellant in support of its claim to deduction of the municipal and urban pro In view of the opening perty taxes in the present case. words of the newly added the expression also used therein cannot have refer "capital charge" and we think it must ence to a charge on the property, so far as income at all, apparently, sul>-clause, sub-clause, invokes It ( 1) T.t •. R. 6o Cal.

1029. 1950 Ntt11 Pieugoods Bazar Co. Ltd. v. Commissioner of lncMm-lfVI,. Bomh<ry Mahajan]. S.C.R. SUPREME COURT REPORTS 557 be understood that is to say, deduction of interest where a capital on the property, tion of annual sums so charged, capital sums, exclude cases where capital the property is made in the same sense as in sub-clause ( 1); the first sub-clause having provided for is charged this sub-clause provides for a- deduc such sums not being intended the securiy of raised on repayable in instalments. the limiting words being In Commissioner Mahomedbhoy Rowji (1 Court considered regards follows:- Income-tax, Bombay v. ), a Bench of the Bombay High the meaning of these words. As "annual charge," Beaumont C. J. observed as "The words, secure an annual liability. " I think, would cover a charge to Kania J ., as he then was, said as follows :- "I do not see how a charge can be annual unless to be made in respect of a payment it rnearis a charge a nmw ll v." This construction of in the iudgment under appeal. the words has been followed ) In Gappumal Kanhaiya Lal Income-tax (2 (the connected appeal before use), Bench of the Allahabad High Court agreed with construction placed on these words in i.e., the words case, to secure an annual liabilitv. there ·is no meaning of the phrase sectian 9 (1) meaning of these words. v.

Commissioner of the Bombay "annual charge" mean a charge It is therefore clear that (iv) and the meaning given is the natural confli~t of j~dicial decisions as "annual charge" occurring As. to referred took the view the phrase "capital charge", Beaumont C. J. in the case above words mean a charge on capital. Kania J., however, took a different view and observed that he was not that a document prepared the suggestion which provides to be made monthly or annually and charged on immoveable pro pel:ty or the estate of an individual becomes a capital In the Allahabad judgment under appeal these charge. 1 ) a certain payment l.L.R. 1943 Born. 628. I.L.R. 1944 All. 780. to accept (1) ( 558 SUPREME COURT REPORTS (1950) 1950 v. Commissioner ef /nfOme-tax, Bomb9 It was said to secure the discharge of an annual words were considered as not meaning a charge on if an annual charge means capital. liability, a chrage then, discharge of a liability of a capital nature.

We think ·this construction the sec tion and is right. capital charge means a charge is a natural ~onstruction of to secure (vi de to assess value of the lessor depends on . building m in which entries have The determination of the point whether the taxes "annual in dispute fall within the ambit of the phrase charge not being a capital charge" they are levied. provisions of the statutes under which Section 143 of the City of Bombay Municip~l Act, 1888, authorises the levy of a general tax on all build ings and lands in the city. The primary responsibility section to pay Jhis property tax is on 146 of the Act). In order the tax provision for the determination of the annual has been made section 154. rateable Section 156 provides the maintenance of an be made assessment book every official year of all buildings in the cit)', rateable value, liable the names of persons primarily for payment of the property tax on such buildings and for which each building has been of the amount Section 167 lays down the assessment assessed. book need not be prepared every year but public notices shall be given in accordance with tions 160 to 162 every year and the provisions of said sections an<l of sections 163 and 167 shall be ap lay down a pro plicable each year.

These sections cedure for hearing objections and complaints agamst in· the assessment book. entries visions determined 1s official year and It recurs from Sections 143 to 168 concern themselves to year. with the imposition, liability and assessment of the year. The amount of the tax for the year tax for and the liability for its payment having been deter the Act then prescribes for its collection in the mined, "The collection of taxes". Section. 197 provides chapter taxes shall be payable in that each of the From liability for . that the 'beginning of is an annual one. property official S.C.R. SUPREME COURT REPORTS 559 In other words, advance in half yearly instalments on each first day of April and each first day of October. The provision as to instalment necessarily connotes an annual half yearly liability. it means that the annual liabi lity can be discharged by half yearly payments. Proce dure has also been prescribed for recovery of the instal ments by presentment of a. bill, a notice of demand and and ·sale.

Finally section 212 provides as then distress, follows:- 1950 V111J Piecegoods, Baz.ar Co. Ltd. v. Commissi'lNr ?f ln&Omt-lax,. Bombay Mahqjan]. "Property taxes due under any building or land shall, ment of th_e land revenue, Government thereupon, said building or land ......... " this Act in respect of subject to the prior pay if any, due to the provincial be a first charge ...... upon the It creates a statutory charge on the building. Urban immoveable property in the same manner as is laid on the munic!pality 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 does so municipal property tax. Section 24 (2) (b) is in terms similar to section 212 of the Bombay Municipal Act. It makes payment of this tax also. the purposes of section 9 of the as well as the namely, immoveable property the same character and stand on the same footing.

Indian the municipal property land or the building security tax are of Income-tax Act both in the case of For that both income-tax Mr. Munshi, the learned counsel for the appellant contended the taxes are assessed on annual value of the land or the building and are annual although it may be that they are collected at taxes, intervals of six _ months for thi:: sake of convenience, that the is assessed on an annual that in allowing deductions all payments made basis, incurred during the ' prc; vious year of or all liabilities assessment should be allowed and question fell clearly within the language of section 9 (1) (iv). The. learned Attorney-General, on the other hand, argued to pay them arUc:t at the beginning year the liability the taxes are assessed that although the taxes itself 560 SUPREME COURT REPORTS [1950] 1950 !(,.. Piee•& cods JJ"rw Co. l.J4. v. ~ of l"'601'W·IO¥, Bomb".1 Mahajan]. levy on two Bombay Acts It is apparent from It was also suggested the payment.

We are satisfied of each half year and unless a notice of demand is no liability to pay issued and a bill presented there then no charge under section 212 of them and that the liability to the Act could possibly arise and the charge is not an pay being half yearly in advance, the taxes anRUal charge. the sense of the property be were a capital charge ing security learned Attorney-General the contentions raised by the are not sound. the whole the t axes are in of the nature of an annual the property and are assessed on the annual value of the property year. The annual liability can be discharged by half yearly instalments. The liability being al} annual one the pro and the property having been subjected to it, (iv) of sub-section ( 1) of section 9 are visions of clause 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 the payment due under the Act unless the time arrives, till then and is not an annual charge.

We <lo not that the charge is a correct construction of section 212. think that this "property taxes due under this Act" mean The words 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 an<l the charge co-exist and are co-extensive. The provisions of the Act affording facilities. for the discharge of the lity do not true nature and character. can it be said the manner laid down by section 197, cannot be sold for recovery of the that the property whole amount due for the year ? The answer to query can only be in the affirmative, property is liable to sale. no charge comes into existence in any way affect If the annuaf liability is not discharged i.e., In Commissioner of Income-tax, Bombay v. Maho ( 1 ) Beaumont C. J., while rejecting the placed reliance on medhov Rowji claim for the deduction of the taxes, (1) T. L.R. '943 Born.

628. 1950 New Pm,gOf/ds Bazar Co. Ltd. v. CommissiOlllr of Income-It»<, Bombay Mahajan]. S.C.R. SUPREME COURT REPORTS 561 Justice said that that circumstance the deduction was not allowable. 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 the legislature made a as municipal taxes and that as special provision for deduction of sums payable in to land revenue but not in respect of sums paid regard on account of municipal taxes For the reference was also made to the provi same purpose sions of section 10 which deal with business allowances and wherein deduction of any sum paid on account of local rates or municipal taxes has been land revenue, allowed. In the concluding part of his judgment · the learned Chief it was not necessary for him . to consider what · the exact meaning of it was sufficient for him to say words was and that that it did not cover municipal taxes which are made a charge on the property under section 212 of the Bombay Municipal Act.

Without <leterminirig exact meaning of the words u·sed by the statute .jt seems to us it was not possible the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a Court tO' the intention of the legislature as ex to give effect in the words used by it and no outside con pressed sideration can be called in aid to find intention. ( v) of the section is not very Again reference to clause is · a .charge of a para helpful. because land revenue that be lands and mount nature on all buildings and a deduction in respect of the amount was men ing so, tioned · in express terms. Municipal taxes, 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 1wt be necessarily a charge on in all cases. The legislature ~eems to have property thought as municipal taxe~ on property if they fall within the ambit of clause . Are concerned, deduction will be claimable in respect of them in section "Income from business" proceed on section 9 with (iv), but not otherwise. The deductions alfowed 11) under the ·head a different footing and construction of the aid of section 10 is apt to mislead. to arrive at so far 1950 New Pitcegoods Bazar Co.

Jd. v. Commissiuner of lncome~tax, Bombay Mahajan]. 562 SUPREME COURT REPORTS f 1950 I Kania J. i.e., liable the consideration under the various the above case in arriving at his conclusion was influenced by these taxes were of a variable character, be increased or reduced prov1s10ns of the Municipal Act and in the natu"re of a contingent charge. With great respect, may be pointed out that all charges in a way may contingent nature. variable and of a be or If no default is made, no charge is ever enforceable and whenever there it can be increased or reduced during either by payment or hy additional borrowing. is a charge, the year the charge was In Moss Empires Ltd. v. Inland R~venue Commis sioners ( 1 ) it was held by the House of Lords that the fact that certain payments were contingent and vari their character of being able in amount did not affect "annual" must annual payments and that the word be taken to have recurrent or being capable of recurrence. the quality of being In Cunard's Trustees v.