Law:

Section:

Section 256, read with section 24(1)(vii), of the income-tax act, 1961-Reference-Question of fact-Urban land tax was demanded in relevant previous year but was not paid-Assessee claimed deduction of said urban land tax in year in which demand was issued-Whether urban land tax could be allowed only on payment basis and therefore no referable question of law arose from tribunal's order holding that assessee's claim could not be upheld-Held, yes Words and phrases-Expression any sums paid on account of occurring in section 24(1)(vii ) of the income-tax act, 1961 Facts Urban land tax had been levied on the assessee but the payment had not been made during the relevant previous year. The assessee sought deduction of the urban land tax in the year in which it had been demanded contending that there was an accrual of liability as soon as the demand was issued and so it was deductible in the year in question. The Tribunal rejected the assessee's claim, holding that the assessee was entitled to deduction of only such sum as had been paid during the year in question. On the assessee's application for reference under section 256(2). Held In CIT v. M.Ct. Muthiah [ 1979] 118 1TR 104 ( Mad.), it was held that so far as the liability towards the urban land tax was concerned, deduction could be claimed only in the year of payment. Further a harmonious construction of section24(1)(vii) would 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. The provision contemplates payment as the basis both in respect of land revenue as well as imposition of other taxes. Consequently, the rejection of the assessee's claim for deduction of urban land tax was justified even though the demand had been raised in the year in question. Therefore, no referable question of law arose from the Tribunal's order. Editor's note The Tribunal had also held (i) that the income derived by the assessee from hire charges of printing machinery and motor vehicles was assessable as income from other sources, and not as business income ; and (ii) that certain sums representing interest provided in respect of moneys…

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