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TMI Blog1949 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... concerning it. Hence their return did not show any rent received in respect of this letting. The Income-tax Officer did not accept this contention and estimated the income from this letting for ten months of the assessable year at ₹ 2,000. This amount was added to the income of the company for the purpose of assessing excess profits tax. The assessee company appealed to the Appellate Assistant Commissioner from the order of the Income-tax Officer, but the appeal was dismissed. There was a further appeal to the Tribunal and there it was contended that this sum of ₹ 2,000 could not be taken into account for the purposes of assessing the income liable to excess profits tax. The appeal was however dismissed as in the view of the Tribunal this sum of ₹ 2,000 was rightly taken into consideration for the purposes of excess profits tax. The Tribunal pointed out that the assessee-company let other portions of their premises to various tenants for use as godown and had received from these tenants yearly a sum of about ₹ 37,000. This sum, the Tribunal point out, was shown by the assessee-company as part of their income from business and they were accordingly assessed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 10 of the Act. The income must be regarded as the income from property and therefore taxable under Section 9 of the Act. In that case the Commercial Properties Limited were a registered company the sole object of which was to acquire land, build houses and let premises to tenants in Calcutta or elsewhere in India. At the time of assessment the sole assets of the assessees consisted of three properties and the sole business of the assessees was the management and collection of rents from the said properties. It was held that the income from these properties could not be treated as the profits and gains of business, but rather as income from property taxable under Section 9 of the Act. At page 1061, Rankin, C.J., who delivered the judgment of the Special Bench of three Judges observed:- In the present case we have a company which owns three estates. It does not appear that any part of that property is outside the definition given in Section 9. It is found to let the houses from time to time, to see to the payment of rents and doubtless the doing of repairs. If that is carrying on a business, then this company carried on a business in the sense in which every landlord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness, in the sense that the rents and profits it receives are profits and gains of business, it appears to me to follow that if a company engaged in some manufacturing business lets out part of its property to tenants the rents and profits received from such letting cannot be regarded as the profits of its business, and therefore the letting of that property is not either part of its business or separate business as that term is regarded in the Indian Income-tax Act. That being so, I should be bound to hold that this sum of ₹ 2,000 received in respect of the letting to Radha Kant Co., could not be assessed to income-tax, as part of the profits and gains of the business, but would have to be assessed as income derived from property. The Tribunal point out that in the past certain other rents for godowns have been included as part of the profits and gains of the business and that is used as an argument for including this sum of ₹ 2,000 as part of the profits and gains of the business. In my view, the rents for these godowns were wrongly included as part of the profits of the business and the assessees were wrongly assessed under Section 10 of the Act in respect of them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the main business of the assessee. There is no finding by the Tribunal that the letting of the property was the whole business or the main business of the assessee-company, but the Tribunal was satisfied that it was part of the business and therefore the income from the letting of such property was rightly included as part of the business income for the purposes of the Excess Profits Tax Act. It is true that in rule 4, sub-rule (4), of Schedule I of the Excess Profits Tax Act it is stated that in the case of a business which consists wholly or partly in letting out a property on hire, the income from such property shall be included in the profits of the business. It is therefore said that as the business of the assessees consisted partly in letting out property, the income from such letting was rightly included as income from business. The rules in Schedule I cannot be construed as being at variance with the substantive provisions of the Excess Profits Tax Act and it appears to me that by the plain terms of Section 2(5) of the Excess Profits Tax Act the holding of property is not a business unless it is the whole function or the main function of a company or a society i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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