RAMANUJAM J.


The assessee seeks a direction from this court, directing the Tribunal to refer the following three questions

"(1) Whether, on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that urban land tax levied on the assessee during the year is not allowable but that only the amount paid during the year is deductible under section 24(1)(vii) in computing income from property?


(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the income from hire charges of printing machinery and motor vehicles derived by the assessee is assessable under the head "Other sources" and not under the head 'Business' ?


(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sums of Rs. 4, 59, 396 and Rs. 2, 862 representing interest provided in respect of moneys borrowed by the assessee and written back in the accounts of the assessee are chargeable to tax as income under section 41 (1) of the Income-tax Act, 1961 ?" *


So far as the first question is concerned, the contention of the assessee is that he is entitled to the deduction towards urban land tax liability in the year in which the demands have been issued. It is not in dispute that in this case, though the demand was issued in the relevant assessment year, payment has not been made. The assessee seeks deduction of the urban land tax demanded in the assessment year, contending that there is an accrual of liability as soon as the demand is issued and, therefore, it is deductible in the year in question. It has been held in CIT v. M. CT. Muthiah that so far as the liability towards urban land tax is concerned, deduction can be claimed only in the year of payment, for s. 24(1)(vii) of the I.T. Act contemplates a deduction being given only in respect of the sums paid on account of urban land tax levied by the State. The learned counsel for the assessee contends that the said decision has not been rendered on a proper understanding of the scope of the provision in s. 24(1)(vii) and that in any event the decision in CIT v. M. CT. Muthiah is the subject matter of a special leave petition before the Supreme Court and, therefore, the question can be taken to be at large. According to the learned counsel for the assessee, s. 24(1)(vii) deals with two categories, (1) land revenue, and (2) any other tax levied, and the payment is contemplated only in the matter of land revenue and so far as any other tax is concerned, the date of demand should be taken as the basis for deduction. According to the learned counsel for the assessee, the expression "any sums paid on account of" qualifies only land revenue and not other tax levied by the State Government and, therefore, the deduction in respect of land revenue can be claimed only on payment, but in respect of any other tax the liability will accrue earlier on the date of demand. We are not in a position to agree with the learned counsel for the assessee in his interpretation of clause (vii) of s. 24(1). If the interpretation sought to be placed by him on the said provision is accepted, it will mean that clause (vii) provides in respect of land revenue the actual payment as the basis and in respect of other taxes the accrual as the basis for deduction. A harmonious construction of the said provision will 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. We cannot assume that the Legislature intended that payment should be taken as the basis only in respect of land revenue but in respect of any other tax accrual should be taken as the basis. We are of the view that the provision contemplates the payment as the basis both in respect of the land revenue as well as imposition of other taxes. In this view of the matter, we do not see any justification for taking a view different from the one taken in CIT v. M. CT. Muthiah. In this view, we do not think there is any ju

stification for directing a reference on question No. 1, especially when such a question has already been answered by this court in the above caseSo far as questions Nos. 2 and 3 are concerned, we feel that those questions arise out of the order of the Tribunal. Hence, we direct the Tribunal to state a case and refer questions Nos. 2 and 3 for the opinion of this court. The reference application in so far as question No. 1 is concerned, is dismissed. No costs.