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Issues Involved:
1. Whether the income arising from the use of vaults is assessable under Section 10 or Section 9 of the Indian Income-tax Act. 2. If the income is not assessable under Section 10, whether it falls under Section 9 or Section 12. Detailed Analysis: Issue 1: Assessability under Section 10 or Section 9 The primary issue is whether the income derived from the vaults by the company is taxable as "income from business" under Section 10 or as "income from property" under Section 9 of the Indian Income-tax Act. The company's business involves storing and preserving films and other cinema-related articles in specially constructed vaults. The vaults were built according to the specifications laid down in the Cinematograph Film Rules, 1948, and were equipped with various facilities and services, such as fire alarms, railway booking offices, and a canteen, among others. The Income-tax Officer initially assessed the income under Section 9, treating it as income from house property. This view was upheld by the Appellate Assistant Commissioner. However, the Income-tax Appellate Tribunal had a split opinion. The Judicial Member considered the income as arising from leasing the premises, thus falling under Section 9. Conversely, the President and the third Member viewed the agreements as licenses, not leases, and deemed the income as arising from business operations, thus falling under Section 10. The court noted that the company's activities were not merely letting out the property but providing a complex of services essential for the storage of films, which included maintaining fire alarms, booking offices, and other facilities. The income derived was not solely from the ownership of the property but from the business operations involving these additional services. Therefore, the court concluded that the income should be assessed under Section 10 as income from business. Issue 2: Assessability under Section 9 or Section 12 Given that the first question was answered in the affirmative, determining whether the income falls under Section 9 or Section 12 became redundant. However, the court provided an analysis that if the income were not assessable under Section 10, it would still not fall under Section 9 because the premises were used by the company for its business purposes, which brings it under the exception to Section 9. Conclusion: The court concluded that the income derived from the vaults should be assessed under Section 10 of the Indian Income-tax Act as income from business. The activities of the company, including the provision of various services and facilities, constituted a business operation rather than mere property letting. Consequently, the first question was answered in the affirmative, and the second question did not survive. The assessee was awarded costs from the department.
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