TMI Blog1963 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... in Bombay which it had fitted up with furniture and fixtures for being run as a hotel. By a lease dated August 30, 1949, the appellant let out the building fully equipped and furnished to one Voyantzis for a term of six years certain from December 9, 1946, for running a hotel and for certain other ancillary purposes. The lease provided for a monthly rent of Rs. 5,950 for the building and a hire of Rs. 5,000 for the furniture and fixtures. The question in this appeal is how the income received as rent and hire is to be assessed, that is, under which section of the Income-tax Act, 1922, is it assessable ? The appellant contends 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 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for what the appellant contends in the first place is that the entire income, and not that from the building alone, should be assessed under section 10. This inaccuracy has not however misled anyone and the matter has been argued before us without any objection from the respondent on the basis as if the question was in terms of the appellant's contention. Now, it is beyond dispute that the several heads of income mentioned in section 6 of the Act and dealt with separately in sections 7 to 12 are mutually exclusive, each head being specific to cover the income arising from a particular source and that it cannot be said that any one 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature. The object of the appellant company no doubt was to acquire land and buildings and to turn the same into account by construction and reconstruction, decoration, furnishing and maintenance of them and by leasing and selling the same. The activity contemplated, in the aforesaid 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may be entertained. In the Mangalagiri Gin and Rice Factory case, what appears to have been really let out was the plant and machinery and the case was decided on the basis of the wear and tear caused to them. Furthermore, in that case it does not appear at all to have been contended that section 9 had any application. Whether that case was rightly decided or not, is not a question that properly arises in this case for none of the considerations which led to the decision arrived at there, exists here; there is no question of any wear and tear to machinery nor of a letting out of any working concern. Besides, the cases of Mangalagiri Gin 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if not included under any of the preceding heads) ..... (3) Where an assessee lets on hire machinery, plant or furniture belonging to him, he shall be entitled to allowances in accordance with the provisions of clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10. (4) Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, he shall be entitled to allowances in accordance with the provisions of clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10 in respect of such 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 aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duary head. If a person cannot be assessed under section 12 in respect of the rent of a building owned by him sub-section (4) will become redundant; there will be no case in which the allowances mentioned by it can be granted in computing the actual income from a building. An interpretation producing such a result is not natural. We must, therefore, hold that when a building and plant, machinery or furniture are inseparably let, the Act contemplates the rent from the building as a residuary head of income. The next question is, does the present letting come within the terms of sub-section (4) of section 12 ? That provision requires two conditions, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of the buildings. What, then, is inseparable letting ? It was suggested on behalf of the respondent Commissioner that the sub-section contemplates a case where the machinery, plant or furniture are by their nature inseparable from a building so that if the machinery, plant or furniture are let, the building has also necessarily to be let along with it. There are two objections to this argument. In the first place, if this was the intention, the section might well have provided that where machinery, plant or furniture are inseparable from a building and both are let, etc. The language however is not that the two must be inseparably connected when 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 content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and such other ancillary businesses as are usually or otherwise can be conveniently carried on with the said business in the said premises such as providing show-cases, show-windows, newspaper stall, dancing and other exhibition of arts, meeting rooms, etc., and not for any other purpose without the previous permission in writing of the lessors." It is clear from this that the building and the fixtures and furniture were to be used for one purpose, namely, for the purpose of running a hotel, with them all together. Again clause 1(h) of the lessee's covenant provided that the lessee is not to remove any article or thing from the premises except for 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 rene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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