Judgement Appeal (No. 82 of 1944) from a judgment of the High Court (June 10, 1943) delivered on a reference made to it by the Appellate Tribunal under s. 66 of the Indian Income-tax Act, 1922, as amended and in force during the fiscal year, 1940-41. The following facts and statutory provisions are taken from the judgment of the Judicial Committee. The respondents constituted a Hindu undivided family, carrying on business at Tejhati in Birbhum district, and also at Nalhati and Lohapur, two other villages there. In assessing the respondents to income tax for the year 1940-41, on the basis of the previous year 1939-40, the Income-tax Officer assessed the total assessable income of the respondents as a Hindu undivided family at Rs.17,250, in which he included a sum of Rs.6,563, as being the profits of the Nalhati business assessable under ss. Law Rep. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta 163 6 (iv) and 10, sub-s. 1 of the Act. The Income-tax Officer disallowed a claim by the respondents to deduct as an allowance authorized by s. 10, sub-s. 2, of the Act a sum of Rs.84 paid by them as a union board rate in Nalhati under the provisions of the Bengal Village Self-Government Act, 1919. The respondents appealed under s. 30 against the order of the Income-tax Officer to the Appellate Assistant Commissioner of Income-tax, Calcutta, B Range, on various grounds, with only one of which the present appeal was concerned, namely, the claim to deduct the Rs.84 above mentioned, but the Appellate Assistant Commissioner affirmed the disallowance of the deduction. The respondents then appealed under s. 33 of the Act to the Appellate Tribunal, who allowed the appeal, holding that the payment of the Rs.84 was made for the purpose of the business and was an allowable deduction in computing the profits of the Nalhati branch. On the application of the present appellant, the Tribunal made the reference under s. 66, the question referred being, " Whether the rate imposed under the provisions of the " Bengal Village Self-Government Act, 1919, on a person " occupying a building within the union and using the same for " the purpose of business is an allowable deduction in computing " the profits of the business under s. 10 of the Indian Income-" tax Act ? " In answering affirmatively the question of law submitted to them the learned judges of the High Court (Derbyshire CJ. and Gentle J.) contented themselves with expressing agreement with the opinion of the Appellate Tribunal and their reasons therefor. By s. 10 of the Indian Income-tax Act, 1922, as it stood amended at the material date — " 10. (1.) The tax shall be payable by an assessee under the " head profits and gains of business, profession or vocation " in respect of the profit or gains of any business, profession " or vocation carried on by him. " (2.) Such profits or gains shall be computed after making " the following allowances, namely — ** * *** " (ix.) any sums paid on account of land revenue, local M rates or municipal taxes in respect of such part of the " premises as is used for the purposes of the business, " profession or vocation ; ** * *** "(xii.) any expenditure (not being in the nature of capital " expenditure or personal expenses of the assessee) laid out or " expended wholly and exclusively for the purpose of such " business, profession or vocation ; ** * *** " (4.) Nothing in cl. (ix.) or cl. (xii.) of sub-s. 2 shall be deemed “to authorize the allowance of any sum paid on account of " any cess, rate or tax levied on the profits or gains of any " business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains; The Bengal Village Self-Government Act, 1919 (Beng. Act V. of 1919) was intended to develop self-government in the rural areas of Bengal, and the financial provisions were contained in Ch. V. of the Act; the material sections of the Act and the material rules made under s. 101, sub-s. 2 (k), of the Act were as follows, Law Rep. 73 Ind. App. Act V. of 1919) was intended to develop self-government in the rural areas of Bengal, and the financial provisions were contained in Ch. V. of the Act; the material sections of the Act and the material rules made under s. 101, sub-s. 2 (k), of the Act were as follows, Law Rep. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta 164 " Section 37 The union board shall impose yearly on " persons who are owners or occupiers or owners and occupiers " of buildings, within the union, a rate amounting to— " (a) the sum required, after deduction of the contribution, " if any, made by the Provincial Government in this behalf, "for the salaries and equipment of the dafadars and chaukidars and the salaries of the establishment of the union " board, and " (b) the sum estimated to be required to meet the expenses " of the board in carrying out any of the other purposes of " this Act, if such estimate has been approved by more than " half the total number of the members of the board at a 11 meeting specially convened for the purpose, " together with ten per cent, above such sums to meet the " expenses of collections and the losses due to non-realization " of the rate from defaulters." " Section 38 (1.) The rate to be imposed by a union " board under s. 37 shall be an assessment according to the " circumstances within the union and property within the " union, if any, of the persons liable to the same " Provided that the amount assessed upon any person in any " one year shall not be more than eighty-four rupees. " (2.) Any person who, in the opinion of the union board, is " too poor to pay half an anna a month, shall be altogether " exempted from payment of any rate under this Act." " Section 39 The assessment for the imposition of the rate " under s. 37 shall be made in accordance with rules prescribed "under s. 101, and any person dissatisfied with the amount " at which he has been assessed may, within such time as may " be specified in those rules, apply to the union board, either " orally or in writing, for a revision of the assessment, and the " union board may amend the assessment or confirm the " same." " Section 101 (i.) The Provincial Government may, after "previous publication, make rules to carry out the purposes of " this Act. " (2.) In particular and without prejudice to the generality " of the foregoing power the Provincial Government may make "rules..... “ (k) for the making of an assessment by the union board " under s. 39, for imposing the rate under s. 37, "and presribing under s. 41,the method and time of payment of such rate." “RULES MADE UNDER SECTION FOR (2.) (K) THEREOF. " ASSESSMENT AND IMPOSITION OF THE UNION RATE. " Rule 1. (i.) After preparing the annual budget estimate in " Account Form No. 1 and not less than two months and a " half before the first day of the year to which the budget " relates, the union board at a meeting shall proceed to assess " the union rate provided in the estimate according to the " circumstances and the property within the union of the " person liable to assessment " Provided that the said period may, for reasons to be " recorded in writing, be at any time altered by the District " Magistrate. Law Rep. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta " (2.) When a union board is for the first time constituted in " any union it may assess the union rate for a portion of " the year in which it is so constituted or of the year next " following." " Rule 2. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta " (2.) When a union board is for the first time constituted in " any union it may assess the union rate for a portion of " the year in which it is so constituted or of the year next " following." " Rule 2. The union board shall first prepare, village by " village and in Form No. 1, a list of all persons owning or " occupying buildings, whether with or without land appertaining thereto, in the union, either permanently or temporarily, showing their trade, business, etc., within the " union, and the estimated annual income which they derive " from buildings or other property or business within the " union. All such persons shall be included in the list even if " some are subsequently exempted.” " Rule 3. The board shall, after considering his debts and " liabilities, if any, determine the total assessable income of the " person concerned, i.e., the income which he derives from " business conducted, or from buildings or other property held, " within the union.” " Rule 5, No person shall be assessed who does not own or " occupy a building within the union. A person who, though " liable to pay the rate, does not reside within the union, shall " be assessed on the buildings which he owns or occupies within " the union, and on any income which he derives from business " conducted, or from landed or other property held, within the " union. " Explanation.—Ownership or occupation includes part " ownership or occupation, and ownership or occupation of a " building or part of a building for any portion of the year " shall render the owner or occupier liable to pay the rate. " Note.—-A person should be deemed to be in occupation of a " building who pays the rent of the building directly or " indirectly/ " Rule 10. The assessment list, after being checked by the " Circle Officer, or the revised list, if any, prepared under r. 9, " shall be published by the union board in the manner laid " down in r. 6, if possible before the first day of the year, and " if not, as soon as possible thereafter." " Rule ii. The assessment list, after being checked by the " Circle Officer, or the revised list, if any, prepared under r. 9, " shall be published by the union board in the manner laid " down in r. 6, if possible before the first day of the year, and " if not, as soon as possible thereafter." " Rule ii. If any person mentioned in the assessment list " ceases at any time after the publication thereof under r. 10 " to occupy any building in respect of the occupation of which " he has been assessed, or if the means and property in respect " of which he has been so assessed are reduced, the union board " at a meeting may exempt him from assessment or revise the " same; and such exemption or revision shall take effect from " such date as the board may direct/ 1945. Oct. 22. Tucker K.C. and Pringle K.C. for the appellant. The first question is whether the union rate is a local rate paid “in respect of such part of the premises as is used for 11 the purpose of the business/ If so, it is expressly allowed under head (ix.) of sub-s. 2 of s. 10 of the Indian Income-tax Act. If it is not, is it expended " wholly and exclusively for the “purpose of such business “within head (xii) of sub-s. 2 of s. 10; and, in either case, is this deduction forbidden by a special section of the income-tax Act, sub-s. 4 of s. 10, introduced (see Act VII. of 1939) consequent on the decisions in In re Selected Coal Company of Manbhum (( 1923) 1 I. T. C 281.) and Isabella Coal Co. v. Commissioner of Income-tax (( 1925) 2 I. T. C. 87, 89, 92.), which prevents deduction of any rate where the rate is either "levied on the " profits or gains of any business " or is " assessed at a pro-" portion of or otherwise on the basis of any such profits or " gains” While it is conceded that the rate is not " levied on " the profits or gains of the business," it is submitted that it is " assessed at a proportion of or otherwise on the basis of the " profits " of the respondents business, and is accordingly not an allowable deduction. Secondly, there is no doubt, it is submitted, that this rate, once the amount is ascertained, is levied on the person in respect of all buildings owned or occupied by him. Therefore, if the taxpayer wishes to deduct this amount he must show that it is a rate paid only in Law Rep. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta 166 respect of business premises. If the rate is paid in respect of any premises which are not business premises, then obviously he cannot deduct that part of it from his business profits. He must still bring himself within heads (ix.) and (xii.) above. This is a case, it is suggested, where the assessee has not only got business premises in the Union5 but other non-business property. Pringle K.C. followed, and referred to the Bengal Municipal Act, 1884, s. 85, and to Deb Narain Dutt v. Chairman, Baruipore Municipality (( 1913) I. L. R. 41 C. l68.). The respondents did not appear. Nov. 20. The judgment of their Lordships was delivered by LORD THANKERTON, who stated the facts and the statutory provisions set out above, and continued The main argument for the Crown was based on sub-s. 4 of s. 10 of the Income-tax Act. It was admitted that the Union Board rate was a local rate and that it was not levied on the profits or gains of the Nalhati business, but it was maintained that the Union Board rate was assessed at a proportion of or otherwise on the basis of the profits or gains of the Nalhati business. Alternatively, it was maintained by the Crown that the respondents had failed to bring the rate here in question within either head (ix.) or head (xii.) of sub-s. 2 of s. 10 for reasons to which their Lordships will refer later. It is clear that the rate is only imposed on persons who are owners or occupiers or owners and occupiers of buildings within the union, but, in arriving at the amount to be assessed on any such person, it is provided by s. 38, sub-s. 1, that the assess ment is to be according " to the circumstances within the union " and property within the union, if any/ of the assessee, with a maximum limit of Rs.84 in any one year in the case of any assessee. Under s. 39 the assessment for the imposition of the rate is to be made in accordance with rules prescribed under s. 101. In order to determine, under r. 3, " the total assessable income of the person concerned, i.e., the income which he " derives from business conducted, or from buildings or other " property held, within the union/ the Board have before them the information prepared under r. a, which shows the buildings occupied or owned in the union, permanently or temporarily, and also " their trade, business, etc., within the union, and the " estimated annual income which they derive from buildings or " other property or business within the union." It will be noted that, in the absence of the necessary powers and machinery, which are not provided by the Act, the estimate of the annual income from business can only proceed on a rough guess, which is in no way comparable with the ascertainment of profits and gains under the Income-tax Act, and, in the opinion of their Lordships, the inclusion of this element of business income as part of the " circumstances " of the assessee with a view to the imposition of the union rate does not fall within sub-s. 4 of s. 10 of the Income-tax Act. It is conceded that the union rate is not " levied on the profits or gains” which clearly implies an ascertainment of such profits and gains, and the words " assessed.... on the basis of any such profits " or gains " in the later part of the sub-section must also be so limited. No such ascertainment of the profits and gains of the business can be undertaken for the purposes of the union rate. The main argument for the Crown therefore fails. on the basis of any such profits " or gains " in the later part of the sub-section must also be so limited. No such ascertainment of the profits and gains of the business can be undertaken for the purposes of the union rate. The main argument for the Crown therefore fails. Turning now to head (ix.) of sub-s. 2 of s. 10 of the Income-tax Act, the argument for the Crown proceeded on a somewhat meticulous examination of the statement of the case, and the papers in the index which are made part of the reference, in order to show that the respondents, in addition to the premises in which they carry on the Nalhati business, have house property in the village, which would show that the rate was only partly related to the premises used for the purposes of the business, and that the respondents have failed to establish what part of the Rs.84 is so Law Rep. 73 Ind. App. 11 ( 1945- 1946) Commissioner of Income-Tax, Bengal V. Gurupada Dutta 167 referable. In the opinion of their Lordships, the decision of the Appellate Tribunal, the question of law referred, and the decision of the High Court, proceed on the footing that the Rs.84 solely relates to the premises occupied for the purpose of the Nalhati business, and, it being admitted that the union rate is a local rate, the question falls to be answered in the affirmative. Their Lordships may add, however, that in any case where the union rate is not wholly referable to premises occupied for the purpose of a business or businesses, the assessee, on establishing the portion of the rate which is so referable, would be entitled to deduct such portion under head (ix.). In this view, no separable question appears to arise under head (xii.), and, in any event, it would be unnecessary to deal with it. Their Lordships will, therefore, humbly advise His Majesty that the appeal should be dismissed, and that the judgment of the High Court should be affirmed.