1973 (5) TMI 15 - HC - Income Tax

Whether on the facts and in the circumstances the Tribunal was right in holding that the composite rent received by the assessee from its tenants should be split up and the amount attributable to the property only should be assessed under section 9(1) of the Indian Income-tax Act 1922 while the amount attributable to the amenities provided by the assessee to the tenants should be assessed under section 12 of the said Act? - question is answered in the affirmative and in favour of the assessee

Summary

Issues:
Whether the composite rent received by the assessee should be split up for assessment under different sections of the Indian Income-tax Act, 1922.

Analysis:
The case involved a question regarding the assessment of composite rent received by the assessee from its tenants. The dispute was whether the rent attributable to the property should be assessed under section 9(1) of the Indian Income-tax Act, 1922, while the amount related to amenities provided by the assessee should be assessed under section 12 of the Act. The property in question was let out to tenants with various amenities provided by the appellant. The Income-tax Officer initially assessed the service charges under section 12 and the rent under section 9. The Appellate Assistant Commissioner amalgamated the service charges and property income for assessment under section 9. The Tribunal, however, held that the composite rent should be split, with the property income assessed under section 9 and the service-related amount under a different section.

The Tribunal's decision was based on the interpretation that section 9 of the Act pertained to tax assessment on buildings or lands and their annual value. If an owner received composite rent for both property and services, it should be split accordingly for assessment. The Tribunal referred to the observation of Lord Macmillan in a relevant case to support its decision. The Tribunal's view led to the question being referred to the High Court for clarification. The High Court noted that subsequent Supreme Court decisions had addressed the issue of whether the rent could be attributed to different sections of the Act, such as section 10 or section 12. However, the High Court focused on the specific question referred by the Tribunal and the facts presented.

In light of the facts found by the Tribunal and the limited scope of the question, the High Court answered in the affirmative and in favor of the assessee. The decision was based on the Tribunal's findings and the specific issue at hand. Both judges concurred with the decision, and each party was directed to bear its own costs. The judgment clarified the assessment of composite rent under different sections of the Income-tax Act, providing a resolution to the specific question referred by the Tribunal.