TMI Blog1946 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... bighas for the term of 40 years at a progressive monthly ground rent therein specified. The lease provided, inter alia, that:- Clause 5. The assessees would be entitled to parcel the land into a number of plots and to erect buildings, etc., thereon and to let out the same on hire and for the purpose of the same to lay out and construct lanes, streets, drains and sewers as might be necessary. 6. The assessees were entitled to construct, and would be held responsible for constructing, 25 separate and self-contained houses on the land at their own cost. 7. The assessees would use only the best available materials while constructing the buildings. 8. The assessees would construct at their own cost pucca structures; the position and detailed construction of each house and the number of rooms, storeys and dimensions thereof were left entirely to the assessees' discretion. 10. The existing tank and ditches to be filled in and levelled by the assessee. 11. Within 5 years after possession given of about 1 bigha 3 cottahs of land, the assessees would erect pucca structures and houses thereon after constructing pucca lanes, drains and sewers. 12. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lease, the lessors became the owners at the time they were constructed; further, the assessment should have been made under Section 10, as profits and gains of the business carried on by the assessees, it being their business to let out houses at rents. The legal position, regarding the ownership of buildings constructed by a lessee upon land belonging to a lessor, is different in India to that in England. According to the maxim Quicquid planta tur solo, solo cedit, in England buildings and other things erected upon or affixed to the soil by a lessee, in the absence of a contract to the contrary, cannot be removed at the termination of a lease and become the property of the lessor. In India the position is governed by Section 108(h) of the Transfer of Property Act which enacts that:- In the absence of a contract to the contrary... ... The lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased but not afterwards, all things which he has attached to the earth: provided he leaves the property in the state in which he received it. Therefore in India, when a lessee erects a house upon his lessor& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not before, the ownership will pass to the lessors. The same position and effect would arise if clause 12 became operative which will not now occur, enabling the lessors to retake the land upon breach by the assessees of clauses 10 and 11. Emphasis was sought to be placed upon clause 24, by which the lessors or their representatives are entitled to visit the demise and supervise the building construction, and clause 7, requiring the best materials to be used. I do not consider these clauses have the effect of making the lessors the owners of the houses. An owner of land, who leases it for the purpose of the lessee erecting houses upon it in accordance with the terms contained in the lease, is entitled to require the best materials to be used and to reserve to himself the right to see this is being done and to satisfy himself the structures are being properly built. Since the assessees are the owners of the houses during the currency of the lease it is next to be considered how they should be assessed with respect to that property. The argument is that, since it is the assessee company's business to erect and let out houses at rentals, the assessment should be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out in the judgment, at page 1062, that in letting the houses, seeing to the payment of rent and (doubtless) doing the repairs, the company carried on business in the sense in which every landlord or owner of that type of property must necessarily carry on business. The argument was rejected that where the owner is a company, the objects of which include the object of owning and managing house property, the income derived from tenants is an income derived from business. With respect to the alleged loss incurred through unsuccessful trading with the property during the accounting year and the contention that the assessment should have been made under Section 10, in which event no income-tax would be recoverable, it was observed by Rankin, C.J., who delivered the judgment of the Court, at page 1062, that This is certainly a very important question, from the point of view of the treasury, because if this argument be right then it will depend to some extent upon the success of the management whether or not the public treasury should derive any income-tax in respect of house property of this character.....................In my judgment, the words of Section 6 and Section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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