COMMISSIONER OF INCOME-TAX CALCUTTA versus DALHOUSIE PROPERTIES LTD.

Citation: [1985] 1 S.C.R. 613 · Decided: 23-08-1984 · Supreme Court of India · Bench: E.S. VENKATARAMIAH · Disposal: Dismissed

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Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX 
CALCUTTA 
v. 
DALHOUSIE PROPERTIES LTD. 
August 23, 1984 
[E.S. VENKATARAMIAH AND V. BALKARISHNA ERADI, JJ.] 
613 
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n 
Income-tax Act, 1961-Proviso to secteon 23 (I) it as stood in the assessment. 
year 1966-67-For determining annual value of property assessee entitled to clainJ 
deductio~ of total liability of municipal tar,es whether actually paid or not. 
C 
Words and phrases-Expression 'borne'-Scope of. 
White determining the· annual value of the property which was liable to 
iricome-tax for the assessment year 1966-67 under the head "Income from house 
propf(rty" under section 22 of the Income-tax Act, 1961, the respondent-asses-
see claimed that the total liability for municipal taxes levied by the corpo-
ration, whether actually paid or not and whether the extent of liability ques-
tioned or not, was deductible under the priviso to section 23 (I) of the Act. 
The department, rejected the claiin. The Income-tax Appellate Tribunal 
allowed the claim. On a refrence being made the High Court held in favour 
of the assessee. Therefore the department filed this petition for special leave 
to appeal. 
Dismissing the petition, 
HELD : The only point is whether the expression 'boine by the owner' 
which appeared in the proviso to section 23 (I) as it stood in the year 1966-67 
would refer to the amount of tax which the owner was liable to pay or amount 
of tax which he had actually paid in discharge of the liability. It is true that 
the expression 'borne' may refer to either the liability which a person is liable 
to discharge or the actual sum paid by him in discharge of that liability. But 
we agre_e with the High Court that in the present context it should be cons-
trued as referring to the former namely, the amount of tax which the owner is 
liable to discharge as stated in the proviso to sectibn 23 (1) of tthe Act and 
not the latter one. The reason for taking this view flows from the scheme of 
the Act itself. [616D-FJ 
Bhagwan Dass Jain v. Union of Tndia, [1981] 2 S.C.R. 808; referred to. 
In the instant case it is not, therefore, necessary that the assessee should 
have actually paid the amount of tax in question before such deduction is 
claimed. The position is not also different even where the assessee has dis-
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614 
SUPREME COURT REPORTS 
(1985] 1 S.C.R, 
A 
puted the correctness of the levy before the local authorities concerned. A 
mere expectation of success in the proceedings in which the assessee has dis-
puted such levy does not disentitle him to the statutory deduction on the basis 
of the levy which is in force. (617B-C] 
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CIVIL APPELLATE JURISDlC'fION: Special Leave Petition (Civil) 
No. 3786 of 1982. 
From the Judgement and Order dated the 21st April, 1978 of 
the Calcutta High Court in Income Tax Reference No. 573 of 1971. 
K.C. Dua and Miss A. Subhashini for the Petitioner. 
.The Judgment of the Court was delivered by 
VENKATARAMIAH, J. 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. 
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 r<:presented 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 th~ assessee. 
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 (I) of the Act in respect of the buil-
dings 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 

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