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TMI Blog1963 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the entire income should be assessed under section 10 as the income of a business or, in the alternative, the income should be assessed under section 12 as income from a residuary source, that is, a source not specified in the preceding sections 7 to 11, with the allowances respectively specified in sub-sections (3) and (4) of that section. For the assessment year 1953-54, the appellant was taxed under section 9 of the Income-tax Act in respect of the building and under section 12 in respect of the hire received from the furniture and fixtures. The Income-tax Officer held that the building had to be assessed under section 9 as it was the specific section covering it and there was, therefore, no scope for resorting to the residuary section, section 12, in respect of its income. The Appellate Assistant Commissioner held on appeal that the rent from a building could only be assessed under section 12 with the allowances mentioned in sub-section (4) where for the letting of the furniture and fixtures it was indispensable to let the building also and as that was not the case here the building had been rightly assessed under section 9. The appellant then appealed to the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of these sections is more specific than another : see United Commercial Bank Ltd. v. Commissioner of Income-tax. Therefore a particular variety of income must be assignable to one or the other of these sections. A broad reference to sections 9, 10 and 12 may now be profitably made. Section 9 provides for the payment of tax under the head " Income from property " in respect of the bona fide annual value of buildings or lands appurtenant thereto of which the assessee is the owner. Certain buildings are exempted but it is not necessary to refer to them. This section also sets out the method of calculation of the annual value of the property on which the tax is to be assessed. It is important to note here that under this section a building has to be assessed to tax on its annual value irrespective of the rent received from it, if any. Section 10 deals with profits and gains of business, profession or vocation. This section also provides the method of computing the income and the allowances that the assessee is entitled to deduct in making the computation. Section 12 is the residuary section covering income, profits and gains of every kind not assessable under any of the heads spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d object of the company, assuming it to be a business activity, would not by itself turn the lease in the present case into a business deal. That would follow from the decision of this court in East Indian Housing and Land Development Trust Ltd. v. Commissioner of Income-tax, where it was observed that " the income derived by the company from shops and stalls is income received from property and falls under the specific head described in section 9. The character of that income is not altered because it is received by a company formed with the object of developing and setting up markets." Now the cases on which learned counsel for the appellant specially relied were cases of the letting out of plant and machinery, in some instances along with the factory buildings in which they had been housed. In all of them, except one, which we will presently mention, the assessee had previously been operating the factory or mill as a business and had only temporarily let it out as it was not convenient for him at the time to carry on the business of running the mill or factory. In these circumstances, it was held that by letting out the plant, machinery and building the assessee was still cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in and Rice Factory and Bosotto Brothers Limited were both decided before sub-section (4) of section 12 was enacted. Sub-section (4) covers a case where a building and furniture are inseparably let out. It cannot be said what the decision in those cases would have been if section 12(4) was then in existence. We do not think that it would be profitable to refer to the other cases cited at the bar for they carry the matter no further. Learned counsel for the appellant also relied on certain clauses in the lease and a clause in the memorandum of the appellant company to show that the lease amounted to the carrying on of a business. We shall now turn to these provisions. Clause 3(b) of the memorandum gave power to the appellant to manage land, buildings, and other property and to supply the tenants and occupiers thereof refreshment, attendants, messengers, light, waiting-room, reading room, meeting room, libraries, laundry convenience, electric conveniences, lifts, stables and other advantages. The contention was that this clause in the memorandum gave the appellant a power to carry on a business of the nature of running a hotel. We do not think, it did. But, in any case, by the leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buildings." To clear the ground it may be stated here that once section 10 is found inapplicable to the case, there is no dispute that the income from the hire of the furniture and fixtures was rightly assessed under section 12 after providing for the allowances mentioned in sub-section (3) of that section. The only dispute that then remains is whether the building is to be assessed under section 9 which of course will have to be on the basis of its annual value or whether the rent from the building has to be assessed under section 12 after the allowances mentioned in sub-section (4) have been deducted. We have earlier said that section 12 can only apply if no other section is applicable, because it deals with the residuary head of income. Now sub-section (4) of section 12 only deals with certain allowances and it obviously proceeds on the basis that the income mentioned in it, namely, that from the buildings when inseparably let with plant, machinery or furniture, is not income falling under any of the specific heads dealt with by sections 7 to 11 and is, therefore, income falling under the residuary head contained in section 12. There a preliminary difficulty arises. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, namely, that the furniture should be let and also buildings and the letting of the buildings should be inseparable from the letting of the furniture. Now here both furniture and building have no doubt been let. The question is: Are they inseparably let ? The High Court does not appear to have answered this question for it was of the view that not only must the two be inseparably let out but also that " the primary letting must be of the machinery plant or furniture and that together with such letting or along with such letting, there is a letting of buildings ". The High Court held that the primary letting in the present case was of the building and, therefore, deprived the appellant of the benefit of section 12(4). We may state here, that the Tribunal had thought that by requiring that the letting of one should be inseparable from the letting of the other, the section really meant that the primary letting was of the machinery and the letting of the build ing was only incidental to the letting of the machinery. It also held that in the present case the primary letting was of the building. Now the difficulty that we feel in accepting the view which appealed to the High Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en let but that the letting of one is to be inseparable from the letting of the other. The next objection is that there can be no case in which one cannot be separated from the other. In every case that we can conceive of, it may be possible to dismantle the machinery or plant or fixtures from where it was implanted or fixed and set it up in a new building. As regards furniture, of course, they simply rest on the floor of the building in which it lies and the two indeed are always separable. We are unable, therefore, to accept the contention that inseparable in the sub-section means that the plant, machinery or furniture are affixed to a building. It seems to us that the inseparability referred to in sub-section (4) is an inseparability arising from the intention of the parties. That intention may be ascertained by framing the following questions : Was it the intention in making the lease--and it matters not whether there is one lease or two, that is, separate leases in respect of the furniture and the building--that the two should be enjoyed together ? Was it the intention to make the letting of the two practically one letting? Would one have been let alone and a lease of it acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of and in the course of the hotel business which latter would be for effecting repairs to them or for replacing them where it was the duty of the lessee to do so under the lease. We think, therefore, that the lease clearly establishes that it was the intention of the parties to it that the furniture and fixtures and the building should be enjoyed all together and not one separately from the other. Before we conclude we think we should refer to two other covenants. First, there is a lessor's covenant No. II(b) to renew the lease of the demised premises which term, it may be conceded, means the building only, for a further term of six years. This clause says nothing about the renewal of any lease in respect of furniture or fixtures. Likewise, clause III(2) provides that if the demised premises, that is to say, the building, be destroyed or damaged by fire it shall be the option of the lessee to determine the lease and in any event the rent shall be suspended until the premises shall again be rendered fit for occupation and use. Here also there is no mention of the furniture. It was said on behalf of the respondent that these two clauses indicate that the building and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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