COMMISSIONER OF INCOME TAX Vs. DALHOUSIE PROPERTIES LIMITED

JUDGEMENT

(1.) This Special Leave Petition is filed under Article 136 of the Constitution by the Commissioner of Income-tax, West Bengal, Calcutta against the decision of the High Court of Calcutta in Income-tax Reference No. 573 of 1971.

(2.) The respondent, Dalhousie Properties Limited was an assessee under the Income-tax Act, 1961 (hereinafter referred to as 'the Act') in the assessment year 1966-67, the relevant previous year being the year ending March 31, 1966. It owned extensive properties and its income from rents realised was substantial. In the assessment year in question, the assessee claimed a deduction of Rs. 1,78,784 which represented the tax levied by the Corporation of Calcutta as a deductible item while computing its income from house property. It appears that the assessee had questioned the extent of liability which had just then been enhanced before the Corporation and on that account had not actually paid the whole of it. This led to a difference of opinion between the department and the assessee.

(3.) In course of time the dispute regarding the assessment of the liability of the assessee under the Act reached the Income-tax Appellate Tribunal. The Tribunal held that the total liability for municipal taxes which the assessee could claim by way of deduction under the proviso to Section 23 (1) of the Act in respect of the buildings during the accounting year was Rs. 1,78,784 and that the said amount was to be allowed as a deduction irrespective of the fact that the assessee had raised a dispute about the extent of the liability before the Corporation and that the assessee had not paid the whole of it to the Corporation of Calcutta. Aggrieved by the above decision of the Tribunal, the Department got the following question referred to the High Court under Section 256 (1) of the Act:-