1. This Special Bench has been constituted under Section 255(4) on the recommendation of the Division Bench of the Tribunal for considering the issue as to whether, on the facts and in the circumstances of the case, the surcharge on the municipal taxes recovered by the owner of the premises from tenants is to be taxed as part of the rent recovered for the purpose of determination of income from house property.
2. The relevant facts briefly stated are that the assessee company had disclosed income from various sources including business and house property in the relevant assessment year under consideration. The assessee company was having l/3rd ownership in building known as Toddar Court' at 18, Rabindra Sarani, Kolkata prior to assessment year 1997-98, the other 2/3rd part being owned by Poddar Udyog Ltd. Subsequently, by scheme of arrangement sanctioned by Hon'ble High Court at Calcutta, the assessee became approximately 50 per cent owner of the said building from assessment year 1997-98 onwards. Since Land & Building were standing in the name of Poddar Udyog Ltd., all formalities relating to municipal assessment, building and collection of rent from tenants were used to be done in the name of Poddar Udyog Ltd. The assessee had disclosed rental income from said property under the head 'Income from house property'. It was noticed by the Assessing Officer that assessee, while collecting rent from the tenants, also" collected municipal tax amounting to Rs. 27,31,070 and as well as surcharge on municipal tax amounting to Rs. 26,59,959. The assessee had included the municipal tax collected from tenants amounting to Rs. 27,31,070 in gross rent received but had excluded the said surcharge on municipal tax amounting to Rs. 26,59,959 in the gross rent received, for the purpose of determining annual value of the property on the basis of actual rent received within the meaning of Section 23 of Income-tax Act, 1961 (in short, the Act). It was submitted before the Assessing Officer by the assessee that surcharge on municipal tax not being part of rent was not includible in the annual value of the property for the purpose of assessment of income under the head 'House Property'. The Assessing Officer did not agree with the assessee's contention and included the said surcharge on municipal tax collected by the assessee in the amount of actual rent received by the assessee with a view to determine income assessable under the head 'House Property', being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeal) (in short the CIT(A), who decided the issue in favour of the assessee by following the decision of Tribunal in the assessee's own case for the assessment year 1986-87. It was held by the Tribunal that the surcharge on municipal tax collected by the assessee cannot be considered to be the income of the assessee by accepting the submission advanced by the assessee before it in the assessment year 1986-87.
2.1 When the matter came up before the Division Bench of this Tribunal in pursuance to an appeal filed by the revenue against the order of CIT(A), on examination of the provisions of I.T. Act, the provisions of Calcutta Municipal Corporation Act, 1980 and the decision of the Tribunal in the assessment year 1986-87 the Division Bench was satisfied that the issue requires re-consideration by a larger Bench of the Tribunal. The Divisional Bench, therefore, recommended for constitution of Special Bench and, accordingly, the Hon'ble President of ITAT has constituted this Special Bench.
3. The ld. Departmental Representative, Shri K. Chatterjee, submitted that consolidated tax payable by the owner under Calcutta Municipal Corporation Act, 1980, includes surcharge on consolidated rate payable in respect of the premises used for commercial or non-residential purposes. In support of his submission the Ld. D.R. referred to the definition of 'consolidated rate' given in Section 2(20) of the Calcutta Municipal Corporation Act, 1980. Our attention was also invited to Sections 170, 171 and 193 of the Calcutta Municipal Corporation Act, 1980 to contend that primary liability to pay consolidated rate including surcharge in respect of the tenanted premises is on the owner of the premises. It was further submitted that merely because the Municipal Act, empowers the owner to recover the surcharge from the tenants does not absolve the owner of the premises from his primary liability to pay the surcharge to the Municipal Corporation. It was further contended that the rent is a monetary compensation payable by the tenant in consideration of granting him right to use, enjoy and occupy the tenanted premises. The Ld. D.R further submitted that when tenant is allowed to use the premises for commercial purposes, the rent would certainly include whatever amount is payable by the tenant for the use of the premises for commercial purposes. It was, accordingly, submitted that the surcharge collected by the owner from the tenant would certainly constitute rent paid for use of the premises for commercial purposes. The Ld. DR further submitted that the actual amount including surcharge received by the assessee from the tenant for use and occupation of the tenanted premises for commercial purposes is to be treated as actual rent received for the purpose of determining annual value within the meaning of Section 23 of the IT. Act (as it then stood), and the taxes including surcharge levied by Municipal Corporation and actually paid by the assessee during the relevant year is to be deducted therefrom as per First Proviso to Section 23 of the I.T. Act. With these submissions he supported the order passed by the Assessing Officer and accordingly pleaded that the issue may be decided in favour of the revenue.
4. Mr. S.C. Chaturvedi, Ld. A.R. of the assessee, has vehemently argued that the issue involved in this case is fully covered by the Tribunal's decision in the assessee's own case for the assessment year 1986-87. It was further contended that the liability to pay surcharge to the Municipal Corporation for commercial use of the property is on the tenant and, accordingly, the surcharge payable by the tenant to the Municipal Corporation is not a part of the actual rent received by the assessee owner in respect of the tenanted premises. In support of his submission the Ld. AR of the assessee referred to the provisions of Sections 170,171,193,230 and 231 of the Municipal Act. Our attention was also invited to circular/order dated 20th January, 1987 issued by the Deputy Assessor of Calcutta Municipal Corporation. The Ld. AR of the assessee also referred to the decision of the jurisdictional High Court in the case of Satish Chandra Agarwalla v. State Bank of India [1988] 1 CLJ 536 to contend that surcharge though a primary liability of landlord, the real and ultimate liability to pay surcharge is of the occupier, who uses the premises for commercial purpose or non-residential purpose. He, therefore, concluded that the assessee had collected the surcharge from the tenant as a trustee or as an agent only to be paid to the Calcutta Municipal Corporation. It was accordingly, contended that the Surcharge collected by the assessee from the tenant is not to be considered as income of the assessee. He also pointed out that the surcharge collected by the assessee from the tenant was not considered to be the income of the assessee in earlier years and as such there was no justification or reason as to why the same is now considered to be the part of annual rent for the purpose of determining income under the head house property. It was accordingly, contended that the view expressed by the Tribunal in the assessee's own case in earlier year may be followed.
5. We have considered the submissions of the parties and perused the materials placed before us. The sum and substance of the dispute involved in this appeal is whether the surcharge on Municipal Tax termed as Consolidated Rate under the Municipal Act collected and recovered by the assessee owner from its tenants is to be included in the actual rent received for the purpose of determining annual value and/of of computing the income under the head House Property. Before we go to consider rival contentions, we find it useful to set out the relevant Provisions of the Income-tax Act, 1961 and as well the Provisions of the Calcutta Municipal Corporation Act, 1980 having direct bearing in understanding the issue involved.
Section 22. Income from House Property.-The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'.
Section 23. Annual value how determined.-(1) For the purposes of Section 22, the annual value of any property shall be deemed to be- (a) The sum for which the property might reasonably be expected to let from year to year; or (b) Where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in Clause (a), the amount so received or receivable : Provided that where the property is in the occupation of a tenant, the taxes levied by any local authority in respect of the property shall to the extent such taxes are borne by the owner, be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.
Explanation 1.-For the purpose of this sub-section, 'annual rent' means- (a) in a case where the property is let throughout the previous year, the actual rent received or receivable by the owner in respect of such year, and (b) in any other case, the amount bears the same proportion to the amount of the actual rent received or receivable by the owner for the period for which the property is let, as the period of twelve months bears to such period.
Section 2(20) Consolidated rate.-Includes the surcharge levied on the consolidated rate under this Act.
Section 2(60) Occupier.-Includes any person for the time being paying or liable to pay to the owner the rent or any portion of the rent of the land or building in respect of which the word is used for damages on account of the occupation of such land or building, and also a rent free tenant: Provided that an owner living in or otherwise using his own land or building shall be deemed to the occupier thereof.
Section 2(62) Owner.-Includes the person for the time being receiving the rent of any land or building or of any land or building, whether on his own account or as agent or trustee for any person or society or for any religious or charitable purpose or as a receiver who "would receive such rent if the land or building or of any part of the land or building were let to tenant.
Section 170. Taxes to be levied by the Corporation.-(1) The Corporation shall, for the purposes of this Act have the power to levy the following taxes: (c) a tax On advertisement other than the advertisements published in newspapers (2) The levy assessment and collection of taxes mentioned in Sub-section (1) shall be in accordance with the provisions of Act and the rules and the regulations made thereunder.
Section 171. Consolidated rate on lands and buildings.-(1) For the purposes of this Act, a consolidated rate on the annual value, determined under this Chapter, of lands and buildings in Kolkata shall be imposed by the Corporation.
(4) Notwithstanding the provisions of Sub-section (2) and Sub-section (9) the Corporation may, where any land and building or hut or portion thereof is used for commercial or non-residential purpose, levy a surcharge on the consolidated rate on such land or building or hut or portion thereof at such rate not exceeding fifty per cent of the consolidated rate as the Corporation may from time to time determine : Provided that where any portion of any land or building or hut is used for commercial or non-residential purpose, the amount of the consolidated rate payable in respect of such portion shall, while fixing the consolidated rate for the entire land or building or hut be separately calculated: Provided further that subject to such rules as may be made by the State Government in this behalf for the grant of exemption from surcharge in respect of any class or classes of lands or buildings or huts used for educational, medical, public health or cultural purposes or for purposes of sports, the Corporation may exempt any such land or building or hut from payment of the surcharge: Provided also that such exemption shall in no-case exceed seventy five per cent of the surcharge.
Section 174. Determination of annual valuation.--(1) Notwithstanding anything contained in the West Bengal Premises Tenancy Act, 1956 (West Bengal Act XII of 1956) or in any other law for the time being in force, for the purpose of assessment of the consolidated rate, the annual value of any land or building shall be deemed to be the gross annual rent including service charges, if any, at which such land or building might at the time of assessment be reasonably expected to let from year to year, less an allowance of ten per cent, for the cost of repairs and other expenses necessary to maintain such land or building in a State to command such gross rent: Provided that there is a transfer, inter vivos, of ownership of any land or building since the last proceeding periodical assessment under Section 179, the annual value of such land or building shall be fixed at seven and a half per cent of the amount stated in the deed of transfer as consideration for such transfer or, if no consideration is stated in such deed of transfer, at seven and a half per cent of the estimated market value thereof: Provided further that while determining the annual value in the case of any loan or building or portion thereof exclusively used by the owner for his residential purpose, the gross annual rent of such land or building or portion, as the case may be, shall be reduced : (a) where the gross annual rent does not exceed six hundred rupees, by thirty per cent; (b) where the gross annual rent exceeds six hundred rupees but does not exceed eighteen thousand rupees, but such percentage of the gross annual rent as is worked out by dividing the gross annual rent by six hundred and subtracting the quotient from thirty one, the difference being rounded off to the nearest place of decimal: Provided also that no such reduction in gross annual rent shall be made: (a) in case the total covered area in any land or building under occupation for residential purpose by the owner exceeds one hundred and fifty square metres, or (b) where a person owns or occupies for residential purpose more than one plot of land or building or portions thereof within the municipal limit of Kolkata.
(4A) If the gross annual rent of any land or buildings or part thereof cannot be easily estimated, the gross annual rent of such land or building for the purpose of Sub-section (1) shall be deemed to be seven and half per cent of the value of the building obtained by adding the estimated present cost of erecting the building at the time of assessment less a reasonable amount to be deducted on account of depreciation if any, to the estimated present market value of the land: Provided that the estimated present cost shall not include the cost of any plant or machinery, excepting those enumerated in Schedule VIII, on the land or the building as aforesaid.
Section 193. Incidents of consolidated rate on lands and buildings.-(1) The consolidated rate on lands and buildings shall be primarily leviable : (c) if the land or building is unlet, upon the person in whom the right to let such land or building vests.
(2) The property tax on any land or building, which is the property of the corporation and the possession of which has been delivered under any agreement or licensing arrangement, shall be leviable upon the transferee or the licence/as the case may be.
(3) The liability of the several owners of any land or building constituting a single unit or assessment which is or purports to be severally owned in parts or flats or rooms, for payment of property tax or any instalment thereof payable during the period of such ownership shall be joint and several: Provided that the Municipal Commissioner may apportion the amount of consolidated rate on such land or building among the co-owners.
(4) Notwithstanding the vesting of any land in the State under the Calcutta Thika Tenancy (Acquisition and Regulation) Act, 1981 in the case of any land comprised in a thika tenancy, the consolidated rate assessed in respect of such land and any hut or building made thereon shall be primarily leviable upon the thika tenant.
Section 194. Apportionment of liability for consolidated rate on land or building when the premises assessed are let or sublet.- (1) If the annual valuation of any land or building exceeds the amount calculated on the basis of the rent of such land or building payable to the person upon whom the consolidated rate on such land or building is leviable under Section 193, such person shall be entitled to receive from his tenant the difference between the amount of the consolidated rate (now property tax) on such land or building and the amount which would be leviable if the consolidated rate on such land or building were calculated on the basis of the rent payable to him.
(2) If the annual valuation of any land or building which is sublet exceeds the amount calculated on the basis of rent of such land or building payable to the tenant by his sub-tenant or to the sub-tenant by the person holding under him, the tenant or the sub-tenant shall be entitled to receive from his sub-tenant or the person holding under him, as the case may be, the difference between any sum recovered under this Act from such tenant or sub-tenant and the amount of property tax on such land or building were calculated on the basis of rent payable to the tenant by his sub-tenant or the sub-tenant by the person holding under him.
Section 195. Recovery of consolidated rate on lands and buildings front occupiers.-(1) On the failure to recover any sum due on account of consolidated rate on any land or buildings from the person primarily liable thereof under Section 193, the Municipal Commissioner shall, notwithstanding anything contained in the West Bengal, Premises Tenancy Act, 1956 or in any other law for the time being in force, recover from every occupier of such land or building, by attachment of the rent payable by such occupier, a portion of the total sum due which bears, as nearly as may be, the same proportion to that sum as the rent annually payable by such occupier bears to the total amount of rent annually payable in respect of the whole of such land or building.
(2) An occupier, from whom any sum is recovered under Sub-section (1), shall be entitled to be reimbursed by the person primarily liable for the payment of such sum, and may, in addition to have resource to other remedies that may be open to him, deduct the amount so recovered from the amount of any rent becoming due from time to time from him to such person.
Section 196. Payment of consolidated rate on any lands and buildings.-(1) Save as otherwise provided in this Act, the consolidated rate on any land or building under this Chapter shall be paid by the person liable for the payment thereof in quarterly instalments and, for the purposes of this section, each quarter shall be deemed to commence on the first day of April, first day of July, first day of October and first day of January, of a year.
(2) The Municipal Commissioner shall cause to be presented to the person liable for payment of the consolidated rate a comprehensive bill in respect of such rate to be paid in quarterly instalments and, for the purposes of this section, each quarter shall be deemed to commence on the first day of April, first day of July, first day of October and first day of January, of a year.
(3) The Municipal Commissioner shall cause to be presented to the person liable for payment of the consolidated rate a comprehensive bill in respect of such rate to be paid in quarterly instalments, showing separately the amount of the consolidated rate due against each quarter and the date on which the consolidated rate for each quarter is due. Such bill shall be sent by post under certificate of posting or by Courier agency to the person liable for payment of the consolidated rate not later than the 31st day of May.
Explanation 'Courier agency' shall mean a commercial concern engaged in door to door transportation of time sensitive documents, utilising the services of a person, either directly or indirectly, to carry such documents.
Section 230. Apportionment of consolidated rate by the person primarily liable to pay.-Save as otherwise provided in this Act, the person primarily liable to pay the consolidated rate in respect of any land or building may recover (a) if there be but one occupier of the land or building from such occupier half of the rate so paid, and may, if there be more than one occupier, recover from each occupier half of such sum as bears to the entire amount of rate so paid by the owner the same proportion as the value of the portion of the land or building in the occupation of such occupier bears to the entire value of such land or building: Provided that if there be more than one occupier such half of the amount may be apportioned and recovered from each occupier in such proportion as the annual value of the portion occupied by him bears to the total annual value of such land or building.
(b) the entire amount of the surcharge on the consolidated rate on any land or building from the occupier of such land or building who uses it for commercial or non-residential purposes : Provided that if there is more than one such occupier, the amount of surcharge on the consolidated rate may be apportioned and recovered from each such occupier in such proportion as the annual value of the portion occupied by him hears to the total annual value of such land or building.
Section 231. Mode of recovery.--If any person primarily liable to pay any consolidated rate on any land or building and is entitled to recover any sum from an occupier of such land or building, he shall have, for recovery thereof, the same rights and remedies as if such sum were rent payable to him by the person from whom he is entitled to recover such sum.
6. It is evident from Section 22 of the Income-tax Act, 1961 that the annual value of the property of the nature specified therein, chargeable to Income-tax under the head 'income from house property'.
The annual value for the purpose of Section 22 is to be determined in the manner as provided in Section 23 of the Act. Section 23(1)(a) of the Act provides that the annual value of the property shall be the sum for which the property might reasonably be expected to let from year to year. Section 23(1)(b) provides that the annual value of property shall be deemed to be, where the property is let and the annual rent received and receivable by the owner in respect thereof is in excess of the sum for which the property might reasonably be expected to let from year to year, the actual amount so received and receivable. As far as the present case is concerned, there is no dispute that the property in question is let out and the assessee has determined the annual value of the property on the basis of actual rent received by the assessee during the relevant year as contemplated by Section 23(1)(b) of the Act. The assessee has declared income under the head house property on the basis of actual rent received, wherein an amount of Rs. 27,31,070 recovered from the tenants as municipal tax has been included but an amount of Rs. 26,59,959 recovered from tenants by way of surcharge on municipal tax has been excluded. The assessee has also claimed a deduction of Rs. 1 crore paid against taxes levied by Municipal Corporation, out of rental receipts so shown by the assessee in determining the annual value of the property as per first proviso to Section 23(1) of the Act. In other words, the assessee has treated the municipal tax of Rs. 27,31,070 realised by the assessee from the tenants as a part of actual rent received for the purpose of determining income under the head house property, against which a deduction of Rs. 1 crore paid towards taxes levied by municipal corporation has been claimed. But, the assessee has not treated the surcharge on municipal tax amounting to Rs. 26,59,959 received or recovered by it from the tenants as part of actual rent received for the said purpose of determining the income under the head house property. It is thus clear that the assessee is not disputing in the treating the municipal tax recovered or received by it from the tenants as a part of the actual rent received for the purpose of determining income from house property. It is also clear that the assessee has claimed the deduction of Rs. 1 crore paid towards taxes levied by Municipal Corporation. It is, now, to be seen as to whether the surcharge on municipal tax received and collected by the assessee from its tenants falls within the ambit of actual rent received in respect of the property let out by assessee to the tenants for their use and occupation.
7. The word 'rent' is not defined under the IT Act. The rent is a payment in money or in kind by one person to another in consideration of granting a right to use, enjoy arid occupy the land or premises demised. In other words, any payment for use, enjoyment and occupation of the rented premises is called rent. In the case of Puspa Devi Gaurisaria v. Sudera Enterprises [ 1990] 2 Cal. LJ., a question relating to the meaning of the term 'rent' had come before the Hon'ble Calcutta High Court for their consideration. The Hon'ble Calcutta High Court in this case has observed and held as under : 17. It is urged by Mr. Roy Chowdhury that A.C. Charge, Corporation Tax, commercial surcharge and multi-storied building tax can not constitute rent. The levy of A.C. Charge is covered by paragraphs I and 111(6-) of the agreement. Other levies by the landlord are covered under paragraph 11(5) of the agreement. The stipulation also provides how to work out the liability. As a matter of fact, the mathematical part of assessment is not challenged. It is only the right to realise as part of rent that is challenged.
18. Now the controversy boils down to the question as to whether all these levies can constitute rent. I have already pointed out that the legislators have not chosen to define rent. We will find the definition given by the Judges.
19. Mr. Mookherjee appearing for the landlord contends that if the charges, under the agreement, were payable to the taxing authorities by the tenant instead of to the landlord such levies can by no, means be termed as rent. But it will appear from the agreement that the levies were leviable by the landlord.
20. Let us see how the English people defined rent. Mr. Mookherjee refers to Wood fall's Landlord and Tenant (1978 Ed.), Vol.-I. The author has referred to Greater London Council v. Counally [1970] 2 QB 100. The Court has opined that rent is sufficiently certain if it can be calculated with certainty at the time when payment is done.
It will appear from the terms of the agreement that all the levies are ascertainable by adopting the method provided for in the agreement. So the levies satisfy this test.
21. Both the Counsels appearing for the landlord rely upon a good number of decisions to impress upon me that all the levies are covered by the term rent. In other words, basic rent together with other levies constitute rent.
22. In Samrose v. Gebbard [1958] I WLR 235 and Sidney Trading Co.
Ltd. v. Finsbury Borough [1952] 1 All ER 460 the Courts held that rent is a monetary compensation payable by the tenant in consideration for the grant. The Court is specific to hold in Property Holding Co. v. Clark [1948] 1 KB 630 that rent includes additional payment for amenities such as gas, cooker, certain fixtures, furnishing and lighting for common parts of the building.
23. Indian courts have in essence adopted the definition given by the English Court, Supreme Court held in State of Punjab v. British India Corporation Ltd. AIR 1963 SC 1459 that rent in its wider sense means any payment made for the use of the land or building. In K. Davalji v. Mahammed Bhai AIR 1970 SC 102 Supreme Court as a matter of fact upheld a distress proceeding levied for realisation of municipal tax which was found to be a part of rent. Calcutta High Court while upholding the constitutionality of the provision for distress in the Act held in Lal Krishna Mundra v. Fatik Chandra Hazra ILR 1973 (I) CA 343 that service charge was part of rent.
Reliance has been placed upon K. D'evalji's case (supra). Numerous cases were reviewed by M.N. Roy, J. in Usha Ranjan Bhattacharya v. Mahalakshmi Thacker 1975 (1) Cal. LJ 204 to define rent. In this case basic rent was fixed at Rs. 99. A charge of Rs. 11 was leviable on account of lift, water, scavenging service. The learned Judge said that rent is whole amount agreed to be paid by the tenant for his enjoyment of what has been let out to him, whether described as rent or otherwise. I am in respectful agreement with the view the levy need not necessarily be termed as rent in order to constitute rent. This decision has been followed by a Division Bench of this Court in Anita Dasgupta v. A.C. Sett (supra). Another Division Bench subscribed the same view in Parul Banerjee v. Anand Kumar Agarwala 1979 (2) Cal. LJ 297. In this case rent and maintenance charge were fixed at Rs. 300 and Rs. 250 respectively. Relying upon Karnani Properties v. Anqustine AIR 1957 SC 309 Court observed that rent is comprehensive enough to include all payment agreed by the tenant to be paid to the landlord for use and occupation not only of the building and its appurtenances but also all fittings, electric installations and other amenities.
24. By these long line of decisions rent has thus been defined as all payments agreed to be made by the tenant to the landlord for enjoyment of the demised property. It is immaterial whether the levy is termed as rent or otherwise.
25. Mr. Roy Chowdhury places reliance upon a Division Bench decision of our Court in Sikha Dutt v. Prasanto Kumar Lahiri 1988(2) CHN 69.
In this case basis rent was fixed at Rs. 1230 Municipal tax Was payable to the landlord separately. Court held that municipal tax was no rent. As a matter of fact, separate payment is not the determining factor. In Anita Dasgupta's case (supra) rent and service charge were realised separately by two separate receipts.
Nevertheless service charge was held to be rent. Sikha Dutt's case, has not taken notice of many of the decisions referred to above. The Bench overlooked that any amount, rent or other levy payable to the landlord for enjoyment of the property must be held to be rent. So the judgment is a judgment per incuriam. With deep respect to the learned judges I am unable to follow the decision.
26. It can therefore be held that all levies agreed by the tenant to be paid to the landlord for enjoyment of the suit shop rooms are rent.
8. Complete reading of the said decision of Hon'ble Calcutta High Court in the case of Puspa Devi Gaurisaria (supra) reveals that rent is comprehensive enough to include any amount or levies agreed to be paid by the tenant of the landlord for use, enjoyment and occupation not only of the demised property or its appurtenances but also all fittings, electric installations and other amenities attached thereto.
It is in material whether the levy is termed as rent or otherwise. In other words, all the levies agreed by the tenant to be paid to the landlord for use, enjoyment and occupation of the demised premises or appurtenances, fittings, electric installations and other amenities attached thereto, whether described as rent or otherwise, would constitute 'rent'. Even, the payment of basic rent and other levies made separately by the tenant to the landlord is immaterial to constitute them as rent.
8A. In the case in hand, it is admitted position that the assessee landlord has realised surcharge on municipal tax from the tenants in respect of the tenanted premises. It is the very nature of use and occupation of the tenanted premises, which is a guiding factor to determine the amount payable to the owner in consideration of granting right to the tenant to use and occupy the tenanted premises. The use and occupation of the tenanted premises by the tenant is incidental to the tenancy created in his favour by the landlord and not independent of it. In the present case, it is an admitted position that the surcharge has been paid by the tenant to the assessee landlord for use of the tenanted premises for commercial purposes. In this sense, therefore, the surcharge so paid by the tenant to the assessee landlord would certainly constitute rent and it would come within the ambit of "actual rent received". In support of our view, a reliance may be placed on the decision of Hon'ble Calcutta High Court in the case of (1) Anita Das Gupta v. A. C. Sett 1988 CWN 242, (2) Us ha Ranjan Bhattacharya v. Mahalakshmi Thacker [1975] 1 Cal. LJ 204, (3) Parul Banerjee v. Ananda Kumar Agarwalla [1'979] 2 Cal. LJ 297, which cases have been reviewed and referred to in the case of Pushpa Devi Gaurisaria (supra). We are in respectful agreement with the decision in the case of Puspa Devi Gaurisaria (supra) holding that all the levies whether termed as rent or otherwise agreed by the tenant to be paid to the landlord for use, enjoyment and occupation of the tenanted premises are rent. In this view of the matter, we are, therefore, of the considered view that the surcharge on municipal tax collected and recovered by the assessee landlord from tenants for commercial or non-residential use of the tenanted premises would certainly come within the ambit of actual rent received by the assessee.
9. Let us now proceed to consider as to whether the surcharge levied by the municipal corporation is the statutory liability of the assessee landlord or of the occupier tenant. In this connection the Ld. Counsel for the assessee as well as Ld. DR has referred to various provisions of Calcutta Municipal Corporation Act (hereinafter referred to as CMC Act) to support their respective contentions. The relevant provisions of CMC Act have already been set out above.
10. Section 170 of the CMC Act empowers the Corporation to levy various taxes including consolidated rate on lands and buildings. As per Sub-section (30) of Section 2 of CMC Act, a consolidated rate includes the surcharge levied under CMC Act. The levy, assessment and collection of taxes including consolidated rate has to be in accordance with the provisions of the CMC Act and the rules and regulations made thereunder as is evident from Sub-section (2) of Section 170 of the CMC Act.
Section 171(1) provides that a consolidated rate on the annual value to be determined under the provisions of the CMC Act, of the lands and buildings shall be imposed by the corporation. Section 171(4) empowers the Corporation to levy a surcharge on the consolidated rate on land & building where such land & building or portion thereof is used for commercial or non-residential purposes. Section 193 provides for the incidence of consolidated rate on land & building. Sub-section (1) of Section 193 provides that the consolidated rate on land & building shall be primarily leviable, if the land & building is let, upon the lessor. Under Section 194 of the CMC Act, there can be apportionment of liability of consolidated rate on land & building when the premises assessed are let or sublet, in case the annual valuation of any land & building exceeds the amount calculated on the basis of the rent of such land & building payable to the person upon whom the consolidated rate on such land & building is leviable under Section 193, and such apportionment between the person upon whom the consolidated rate on such land & building is leviable under Section 193 and his tenant shall be of the difference between the amount of the consolidated rate on such land & building and the amount which would be leviable if the consolidated rate on such land & building were calculated on the basis of the rent payable to him. On the failure to recover any sum due on account of consolidated rate from the person primarily liable thereof under Section 193, Section 195 of the CMC Act speaks of recovery from every occupier, by way of attachment of the rent payable by such occupier, a portion of the total sum due which bears, as nearly as may be, the proportion to that sum as the rent annually payable by such occupier bears to the total amount of the rent actually payable in respect of the whole of such land & building. Thus, in the case of failure on the part of the owner who is primarily liable to pay the consolidated rate, the law empowers the recovery of the sum due, from the tenants out of the rent payable by him to the owner and the tenant eventually may adjust the same against the rent payable to the owner.
Section 196 speaks of payment of consolidated rate on any land & building by the person primarily liable for the payment thereof in quarterly instalments, and also speaks of presenting comprehensive bill in respect of such consolidated rate by the corporation to the person primarily liable for payment thereof. It is thus the owner, who is primarily liable to pay consolidated rate on land & building in quarterly instalments and who is the person to whom the Corporation shall present the comprehensive bill in respect of such consolidated rate. Section 230(a) of the CMC Act empowers the owner to recover from the occupier or occupiers half of the consolidated rate paid by him.
Section 230() of the CMC Act provides that the entire amount of the surcharge on the consolidated rate on any land & building may be recovered from the occupier of such land & building, who uses it for commercial or non-residential purposes and if there is more than one occupier it can be apportioned and recovered from each such occupier in such proportion as the annual value of such portion occupied by him bears to the total annual value of such land & building. Section 231 further provides that if any person primarily liable to pay any consolidated rate on any land & building and is entitled to recover any sum from an occupier of such land & building he shall have, for recovery thereof, the same rights and remedies as if such sum were rent payable to him by the person from whom he is entitled to recover such sum.
11. It is thus seen that the surcharge is levied on consolidated rate on such land & building or portion thereof, which are used for commercial or non-residential purposes. In view of the definition of the consolidated rate in Section 2(20) of the CMC Act there is no doubt that the consolidated rate includes the surcharge. A surcharge leviable under Section 171(4) of the CMC Act is in fact an additional tax on the building as held by the Hon'ble Calcutta High Court in the case of Satish Chandra Agarwalla (supra) wherein the decision of Hon'ble Apex Court in the case of Bisra Stone Lime Co. Ltd. v. Orissa State Electricity Board AIR 1976 SC 127 has been relied on. The decision of the Calcutta High Court in the case of Satish Chandra Agarwalla (supra) on this aspect is as under : 21. A surcharge in fact an additional tax on the building. According to the decision of the Supreme Court in Bisra Stone Lime Co. Ltd. (supra) surcharge is a part of consolidated rate and it is really an enhancement of consolidated rate and not a new tax. In view of the definition of the consolidated rate in Section 2(20) of the Calcutta Municipal Corporation Act, 1980, there can not be any controversy that consolidated rate includes the surcharge....
12. Thus, on bare reading of Sections 170,171,193,195,23Oand 231 of the CMC Act and looking to the scheme of the CMC Act it is clear that the owner is liable to pay the consolidated rate and taxes including the surcharge on consolidated rate. The corporation is primarily concerned with the recovery of consolidated rate and taxes including the surcharge from the owner, and several modes of recovery have been provided in the CMC Act. It is also clear that in case of failure to recover the consolidated rate including surcharge from the Owner, who is primarily liable to pay the same, the Corporation may recover the sum due from every occupier by way of attachment of the rent payable by the occupier to the owner but not exceeding the amount of rent so payable by the occupier. In other words, in case the owner fails to pay the consolidated rate including surcharge due from him/the occupier's liability towards the Corporation is only limited to the extent of rent payable by him to the Owner and that payment by the occupier to the corporation may be adjusted by him against the rent payable to the Owner, It is all together a different matter that the law empowers the owner, primarily liable to pay the consolidated rate including the surcharge, to recover from the occupier a share of consolidated rate as well as the amount of surcharge in the manner as provided in Sections 230 and 231 of the CMC Act. Merely because the landlord is empowered to recover and realize the surcharge from the tenant under the provisions of Sections 230 and 231 of the CMC Act it would not lead to a conclusion that the assessee had collected the surcharge from the tenant as a trustee or as an agent. Under the scheme of the CMC Act there is no such provision to treat the owner of the premises as a trustee or as an agent to collect the surcharge from the occupier. On a correct reading of the various provisions of the CMC Act which are mentioned hereinabove, in our considered view, it is clear that it is the primary liability of the landlord to pay the surcharge and even in case he fails to recover or realize the surcharge from the occupier, he is still liable and responsible to pay the surcharge to the municipal corporation. In view of the clear primary liability of the landlord to pay the surcharge it cannot be said that he is merely a .trustee or an agent and as such he is not statutorily liable to pay surcharge to the municipal corporation. There is no provision in the CMC Act to exempt the owner from paying surcharge in case the same is not recovered by him from the occupier. By calling the amount of surcharge collected by the owner from the occupier to meet its statutory liability under the CMC Act, as deposit, it can not be said that the owner has constituted itself as a trustee, and, therefore, the surcharge collected or recovered is not required to be regarded as a part of rent payable for use and occupation of tenanted premises. Even the decision of Hon'ble Calcutta High Court in the case of Satish Chandra Agarwalla (supra) does not speak of treating the owner of the premises as a trustee or as an agent to collect the surcharge from the occupier. In this connection the following observation of Hon'ble Madras High Court in the case of CIT v. Southern Explosives Co. [2000] 242 ITR 107 is useful to be referred- , In the instant case, the amounts collected by the assessee were amounts which were meant to be utilized by the assessee for meeting its tax liability. Even if the assessee had paid over the entire amount received by it as deposit towards sales tax to the State Government, it would still have been open to the assessee to seek refund if the assessee wished to claim such refund on the ground that the tax had been levied at a higher rate than the rate permissible. In the event of such claim being upheld, it would have been open to the assessee, to receive a refund and thereafter pay those amounts to the persons from whom the amounts had been collected.
The fact that the assessee had chosen to adopt the device a labelling a part of the amounts collected towards its sales tax liability as deposit cannot make a difference. The accounts were received for the purpose of meeting the tax liability. The fact that the assessee did not pay over those amounts to the State Government only disentitles the assessee from claiming the deduction to the extent it could have had the amounts been paid over in full to the State. The purchasers from the assessee did not derive any benefit from the device adopted as the purchasers were made to pay the amounts and the amounts were merely retained by the assessee and in the meanwhile, used by it in the normal course of its business. The receipt which was in its true character a trading receipt cannot be rendered otherwise by the assessee labelling the receipt as a deposit.
It would certainly be wholly unjust if the assessee were to be permitted to collect the amount from the customers as amounts payable towards sales tax and still claim that it is not a trading receipt. If and when the amounts collected are refunded to the persons from whom collection had been made the assessee can claim deduction in the year in which such refund is effected. That is What the Commissioner had directed. The Tribunal was in error in holding otherwise.
The true character of the receipt must be judged with reference to the reasons for the collection and the liability for meeting which the collection was made. When the liability is a statutory liability, which the assessee was required to meet and for meeting which it was by the statutes or authorities permitted to collect the amount required from its customers, the true character of the collection is a trading receipt. By calling a portion of the amount as deposit, it cannot be said that the assessee had constituted itself as a trustee, and therefore, the amounts received were not required to be regarded as part of its trading receipt. Had the assessee been unsuccessful in its claim that his goods were not to be treated as chemicals there is no doubt that the amounts though collected as deposit, would have been paid over to the State 6overnment as the amounts had been collected for payment to the State Government as sales tax in the event of the goods being treated as chemicals.
13. At this stage, we may make a useful reference to the decision of Hon'ble Gujarat High Court in the case of CIT v. Ahmedabad Electricity Co. Ltd. [2003] 262 ITR 97', 108 where in the assessee's contention that Section 43B.would not be applicable to the assessee's case on the ground that electricity duty recovered by it did not belong to it, but it was retained for a short time, as agent of the Government was negatived by the Hon'ble High Court holding as under : Under Section 4(1) of the Bombay Electricity Duty Act, 1958, every licensee shall collect any pay to the Government at the time and in the manner prescribed the proper electricity duty payable under the Act in respect of energy supplied by him to customers. The duty so payable shall be a first charge on the amount recoverable by the licensee for the energy supplied by him and shall be a debt due by him to the State Government. As per the proviso to Sub-section (1) of Section 4, where the licensee has been unable to recover his dues for the energy supplied by him, he shall not be liable to pay the duty in respect of the energy so supplied. It is, thus, the obligation of the licensee to pay electricity duty to the Government in respect of energy supplied by the licensee to the consumers unless the licensee is unable to recover the dues for the energy supplied by it. If the licensee recovers his dues, but does not recover the amount of duty, in that event, the duty will be a first charge on the amount recovered by the licensee for the energy supplied. The provisions regarding recovery made under Section 8 make it clear that if the sum due on account of electricity duty was payable under Sub-section (1) of Section 4, the sum together with interest thereon shall be recoverable either through the civil court or as an arrear of land revenue from the consumer, or subject to the proviso to Sub-section (1) of Section 4, from the licensee at the option of the State Government, Therefore, in cases where the proviso to Section 4(1) is not attracted and the licensee cannot be said to have unable to recover the dues for energy supplied by the licensee, the licensee can, at the option of the State Government, be proceeded against for the recovery of the electricity duty under Section 8(d) of the Act. In view of the clear liability of a licensee who has recovered the charges for the electricity supplied, it cannot be said that a licensee being an agent is not liable to pay the electricity duty to the State Government. He would not be liable to pay the duty only if he is unable to recover his dues for the energy supplied by him. These provisions obviously have a bearing on the actual recovery of the dues and would not instantly apply when the accounting is kept on accrual basis, because, at the time of accrual entry, the question of being unable to recover the dues at that very moment cannot arise. We, therefore, cannot subscribe to the observations of the Tribunal that Section 43B would not be applicable to the assessee's case on the ground that the electricity duty recovered by it did not belong to it, but it was retained for a short time, as agent of the Government.Hon'ble Supreme Court. In Chowringhee Sales Bureau (P.) Ltd. v. CIT [ 1973] 87ITR 542, the appellant as an auctioneer effected sales of furniture and realised from the buyers in addition to the commission Rs. 32,986 as sales tax. The appellant neither paid this amount to the actual owner of the goods on whose behalf the goods were auctioned nor deposited the same in the State Exchequer upon the plea that the statutory provisions creating that liability upon it was not valid. The amount was also not refunded to the persons from whom it had been collected. The Supreme Court held that amount of Rs. 32,986 to be the trading or business receipts of the auctioneer. . . .
15. To the same effect are the decisions of Hon'ble Supreme Court in Sinclair Murray & Co. (P.) Ltd. v. G77"[t974] 97 ITR 615 and CIT v.Bazpur Co-operative Sugar Factory Ltd. [1988] 172 ITR 321'. In these cases it has been the consistent view of the Hon'ble Supreme Court that if a receipt is a trading receipt the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as a trading receipt. It is the true nature and quality of the receipt and not the head under which it is entered in the account books which is decisive. The Hon'ble Supreme Court has further observed that eventually if the amount so collected is passed on to the State Government or refunded to the purchasers, the assessee would be entitled to claim deduction of the sum when so paid or refunded. The Hon'ble Supreme Court in the case of K.C.P. Ltd. v. CIT [2000] 245 ITR 4212 has referred to and applied the aforesaid decisions amongst others, of Hon'ble Supreme Court in Chowringhee Sales Bureau (P.) Ltd. 's case (supra), Sinclair Murray & Co. (P.) Ltd. 's case (supra) and Bazpur Co-operative Sugar Factory Ltd. 's case (supra) and has taken the similar view. The principle laid down by Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. (supra) has been applied by Hon'ble Gujarat High Court in the case of Plastic Products Engg. Co. v. CIT [2000] 245 ITR 349, wherein it has been observed as under----- ... The assessee has received the disputed amount described as excise duty which he is otherwise entitled to collect as part of sale price though by showing it separately in the invoices from the buyers. The amount has been collected in no other character except as seller of goods as part of the sale, price at best subject to the stipulation that in case ultimately the liability of tax is not sustained the amount collected as tax would be refundable. That is otherwise so in the case of any amount collected from the buyer referable to indirect tax, where ultimately any refund becomes due, the same can be refunded to the payer only on showing that the same has not been passed on to the buyer. The court therefore while holding that the amount is a trading receipt made it further clear that the assessee may be entitled to deduction of the amount as and when it bears the character of expenses as allowable as trade expenses.
16. In view of the above discussion and having noticed the legal position as enumerated above we find it difficult to accept the submission made on behalf of the assessee that the surcharge collected or recovered by it from the tenants did not belong to it but it was collected or retained as an agent of the Municipal Corporation.
17. Keeping in view the above position of law, we now turn to the factual matrix of the case. In the present case, the Annual valuation made by the Municipal Corporation with effect from 4th quarter of 1986-87 was disputed by the owner, and the owner had taken the matter before the Hon'ble High Court at Calcutta. The main grievance of the owner before the Hon'ble High Court at Calcutta was about their having been denied of a proper hearing at the end of the "Hearing Officer" of the Corporation, the reduction towards service/maintenance charges claimed at 20 per cent of the gross annual value and the extent of liability towards penalty, surcharge and interest and whether the owner was entitled to any waiver or dispensation of any liability towards penalty, surcharge and interest: The matter was disposed of by the Hon'ble High Court at Calcutta vide order dated July, 16, 1999 directing as under : 1. The appellants-petitioners shall deposit by way of "on account payment" for the past arrears a sum of Rs. 1.5 crores with the respondent Corporation within a period of two months from today.
This amount shall be kept in suspense account and would be liable to adjustment, depending upon the outcome of the hearing to be given to the appellants.
2. The concerned Hearing Officer is directed to give a fresh hearing/ grant rehearing to the appellants with respect to determination of the liabilities starting from 4th quarter of the assessment year 1986-87.
In the course of such hearing, the Hearing Officer shall, apart from determining the tax liability, also consider whether the appellants are entitled to any reduction on account of the service charges/maintenance charges, as claimed by the appellants. The appellants say that they were entitled to 20 per cent reduction on this account and that the Corporation has granted such benefit to some others similarly placed. The respondents say that they are not entitled to any such Discount because Section 174(1) "of Calcutta Municipal Corporation Act, 1980, does not contain any prescription for such reduction and that there is as Standard reduction prescribed which is at the rate of 10 per cent.
Notwithstanding these rival contentions we direct the Hearing Officer to consider, in the light of the law applicable on the subject whether the appellants are entitled to any discount on this account. The Hearing Officer shall also determine the extent of any liability towards penalty, surcharge or interest. While he is adjudicating on this question he will consider whether the appellants are entitled to any waiver or dispensation of any liability on such account. After grant of opportunity of hearing, the Hearing Officer shall pass as detailed speaking order and communicate -the same to the appellants within a period of 3 months from the date the appellants deposit the amount of Rs. 1.5 crores.
However, the appellants shall keep on depositing the current tax at the rate at which they were paying prior to fourth quarter of 1986-87.
There shall be an anunconditional stay of recovery for a period of two months from today. If the appellant deposit the amount of Rs. 1.5 crores during this period of two months the stay shall continue until the Hearing Officer Communicates the order pursuant to this Direction. If, however the aforesaid amount of Rs. 1.5 crores is not deposited within two months from today the stay Order shall stand vacated automatically and without any reference to the Bench immediately on the expiry of two months from today. All such payments made, however, shall be without prejudice to the ultimate rights of the parties.
The appeal is treated as on the day's list and both the appeal and the application are disposed of accordingly. All undertakings are discharged.
18. In pursuance to direction given by the Hon'ble High Court, the Hearing Officer of the Corporation decided the matter vide his order dated 21-7-2000 in connection with objection raised by the owner against general revaluation with effect from 4th quarter of 1986-87 in respect of the said building, reduction on account of service charges/maintenance charges and also the extent of liability towards the penalty, surcharge or interest and whether the owner is entitled to any waiver or dispensation of any liability towards penalty, surcharge or interest and whether the owner is entitled to any waiver or dispensation of any liability towards penalty surcharges and interest.
It was held by the Hearing Officer that the owners are not entitled to any waiver or dispensation of any liability on account of penalty, surcharges and interest nor the reduction on account of service/maintenance charges out of the gross value cannot be more than 10 per cent as provided in the existing provisions of Section 174(1) of the CMC Act. The Hearing Officer also determined the amount of outstanding liability from 4th quarter of 1986-87 to 1st quarter of 2000-2001, which included, inter alia, the liability towards the surcharge also. In this respect the following portion of the order passed by the Hearing Officer would be useful to understand the composition of outstanding liability payable by the assessee.
Since the statement filed on behalf of M/s. Poddar Udyog Limited on 4-2-2000 does not include the dues accrued on the basis of the annual value for 4/86-87 fixed by the Hearing Officer on 11-2-1988 at Rs. 1,21,61,210.00 this statement filed on behalf of M/s. Poddar Udyog Limited cannot be relied upon.
On the other hand the statement submitted on behalf of Calcutta Municipal Corporation during hearing on 19-5-2000 include the outstanding liability including surcharge, interest and penalty as well on the annual value of Rs. 1,21,61,210.00 with effect from 4th quarter of 1986-1988 this statement submitted on behalf of Calcutta Municipal Corporation can be relied upon.
Accepting this statement filed on behalf of Calcutta Municipal Corporation the total outstanding liability in respect of 18 Rabindra Sarani including surcharge interest and penalty based on the Annual value of Rs. 1,21,61,210.00 from 4th quarter of 1986-1987 to the 1st quarter of 2000-2001 after adjustment of all payments made excepting unadjusted amount of Rs. 2,05,56,890.28 is arrived at Rs. 14,50,35,320.40 and after adjustment of the unadjusted payments of Rs. 2,05,56,080.28 such total liability in respect of 18, Rabindra Sarani as on 1st quarter of 2000-2001 including surcharge interest and penalty is fixed at Rs. 12,57,67,812.75 an amount of Rs. 27,93,334.47 still lying as deposit under suspense account.
19. The order of the Hearing Officer was not disputed further by the owner. On perusal of the Hon'ble High Court's order as well as the order passed by the Hearing Officer and on perusal of various bills presented by the Kolkata Municipal Corporation to the assessee, it is clear that the outstanding liability payable by the assessee did consisted of, inter alia, the amount of surcharge also, which was determined to be payable by the assessee owner in respect of the tenanted premises. In the relevant assessment year under consideration the assessee has debited an amount of Rs. 1 crore being ad hoc payment made to Kolkata Municipal Corporation on account of outstanding dues which admittedly includes, inter alia, surcharge also. The liability to pay surcharge by the assessee is not in dispute. The aforesaid sum of Rs. one crore paid by the assessee to the Corporation has been claimed as deduction while computing the income under the head "house property". But at the same time the assessee has not included the amount of surcharge collected by it from the tenants, in the amount of actual rent received during the year. There is no logic for exclusion of surcharge component collected by the assessee from its tenants in the amount of actual rent received during the year. By doing so, the assessee has distorted the accounts. There is no doubt that the payment of Rs. one crore would be adjusted against the outstanding dues payable to the Corporation, the outstanding dues admittedly includes surcharge also. Logically speaking, if the assessee excluded surcharge for being considered as part of actual rent received, it should have reduced from the payment of Rs. one crore the surcharge component in the process of claimed deduction of taxes paid to local authority under the first proviso to Section 23(1) of the IT. Act. In this view of the matter, we do not find any justification for the assessee to exclude the surcharge component collected by it from the tenants for the purpose of determination of actual rent received and consequently for the purpose of determining the income chargeable under the head "house property".
Further the amount of surcharge collected by the assessee was the amount which were meant to be utilized by the assessee for meeting its primary liability to pay surcharge to the Corporation. The tenants were made to pay the amount of surcharge for use of the tenant premises for commercial or non-residential purposes, to the owner and the amount of surcharge collected by the assessee owner has been merely retained by the assessee and in the meanwhile used by the assessee. The surcharge which was in its true character a payment for use of tenanted premises for commercial or non-residential purposes and as such constituted "rent", cannot be rendered otherwise by the assessee labelling the receipt as a deposit collected in the capacity of agent or trustee. The amount of surcharge has been collected by the assessee in no other character except as owner of the tenanted premises and as such, in our considered view, it constitutes a part of "rent". The assessee would, of course, be entitled to claim deduction of the amount of surcharge as and when it pays it to the Municipal Corporation or it is refunded to the tenants. It would be pertinent to note that the amount of surcharge collected by the assessee from time to time has not been returned to the tenants but retained by it to discharge its statutory liability of paying the surcharge to the Corporation. Therefore, looking to the issue also from this angle as discussed in this para, we do not find any force or merit in the contention of the Ld. Counsel for the assessee that the surcharge collected by it is not tantamount to rent for the purpose of determination of income under the head "House Property".
20. Considering the totality of the facts and circumstances of the case and in the light of foregoing reasons, we are of the considered view that the surcharge on the municipal taxes i.e., surcharge on the consolidated rate as referred to in CMC Act, collected and recovered by the assessee as the owner of the premises from the tenants or occupiers, is a part of the actual rent received by the assessee Within the meaning of Sub-clause (&) of Sub-section (1) of Section 23 of the I.T. Act and consequently it has to be included for the purpose of determination of income under the head "Income from House Property".
Needless to mention that the assessee shall be entitled to claim deduction of the amount of surcharge so collected and recovered as and when it is paid to Municipal Corporation as provided in the proviso to Sub-section (1) of Section 23 of the I.T. Act while determining the Annual value of the property for the purpose of Section 22 of the I.T.Act. The order of CIT(A) is, therefore, set aside and that of the Assessing Officer is restored.