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TMI Blog1991 (4) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... ir-conditioning plant at 6 Saket Community Center and by means of a lease deed, referring to the earlier lease deed of the building, the additional rental of Rs. 12,000 was agreed to by the lessee. The assessee in its profit loss account depicted the income from these two properties and the air-conditioning plant and the final result was a loss. The return showing loss under the head business was filed for both the assessment years and the assessing officer accepted the return with the modification of non-allowance of house tax and ground rent which were unpaid, by applying the provisions of section 43B of the Act. The assessee only raised the issue of the amounts disallowed as wrong, but on principle of disallowance did not make any challenge. The first appellate authority directed the assessing officer to disallow only the amount that remained unpaid. This was accepted by the assessee. 3. The Commissioner for the assessment year 1986-87 invoked his powers under section 263 of the Act, for the reason of the income from property could not have been assessed under business income, but under the head property income. He was of the opinion that, leasing of the air-conditioning p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet for the assessment year 1985-86. He also pleaded that, it was not one of those window type air-conditioners which could be installed in a few hours or in a day but an extensive one, the completion of which took few months. As soon as it was complete, and commissioned, it was provided to the same lessee on an additional rental, which also goes to establish the claim of the appellant that, the intention to let the building with air-conditioning facility existed right from the beginning. He therefore contended that, it needs to be appreciated that, such kind of facility of air-conditioning, though provided subsequent to the lease of the building, was expected of by the lessee. He pleaded that, more than the actual letting of the composite unit, what is essential is the intention, which is clear from the actual actions and facts. He accordingly contended that, the income from the property, both with and without the air-conditioning facility should be assessed as either income from business or as from other sources but not as income from property. He placed reliance on the Delhi Bench decision in Daljit Exports (India) (P.) Ltd. v. ITO [1991] 36 ITD 305 and submitted that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the record of this court. Before I proceed with the contentions as were made by either side, I shall bring out the computation of the income as was made by the Commissioner in his order, which he thought was proper : Assessment year Assessment year 1985-86 1986-87 Rental Receipts 188129 528000 Less : House Tax paid nil 51030 : Ground rent paid nil nil : 1/6th for repairs 31355 79495 : insurance 12069 nil : interest on loans 192539 nil ---------------------- ----------------------- 235963 130525 ---------------------- ----------------------- (-)47634 337475 ---------------------- ----------------------- The Commissioner found as a fact that No. 6 Saket Community Center property was provided with the air-conditioning facility and on the air-conditioning, the assessee had incurred a cost of Rs. 6,07,705. The other factor noted by the Commissioner was that, the tenants M/s United Technical Co. Pvt. Ltd., and M/s Khemka Aviation Pvt. Ltd. had provided interest security deposit of Rs. 10 lakhs and Rs. 10.50 lakhs, respectively, for obtaining lease of the property for indefinite period. The Commissioner after considering the main object of the company and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere exists any material to indicate the intention of the assessee and its lessee for the appellant company should provide the air-conditioning facility also as part of the lease. The principle for determination of the intention between the two parties is to be gathered from the direct evidence, such as agreement and other material such as correspondence exchanged by the parties and their actions and if not directly available, could be gathered from other factors, which throw light on the transaction. It is not disputed that, the lease-deed is silent on this intention of the provision of the air-conditioning facility as a part of the deal, but, considering the volume of cost on the air-conditioning which is Rs. 6,07,705 incurred by the appellant company, it could be taken as sufficient indication of the intention by the lessee to take the building on lease subject to the assessee providing the air-conditioning facility. If it was not so required and insisted upon then, there was no necessity for the appellant company to incur a cost of Rs. 6,07,705 on the air-conditioning plant. This factor of assessee incurring the cost and mentioning in the lease deed of the air-conditioning facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head other than income from property, it requires the existence of that property which must also have been let as part of the deal along with the building, making the property and the facility inseparable. The character of inseparability arises from the existence of the properties, viz., building, plant, machinery or plant, followed by they being let together resulting in any inseparable letting, i.e., one could not be assessed without the other. Therefore, for the assessment year 1985-86, since it was letting of the building only, indicating that it was capable of being letting without the airconditioning facility, the income from the property could not be assessed under any other head other than property. 7.1 At this point, it would be necessary to bring out the observation of the Supreme Court in the case of Sultan Bros. The Supreme Court had observed, thus : " Whether a particular letting is business has to be decided in the circumstances of each case. Each case has to be looked from a businessman's point of view to find out whether letting was the doing of a business or the exploitation of his property as owner. A thing is not by its very nature a commercial asset. A com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir-conditioning facility as one composite letting and it is impossible to enjoy the facility of air-conditioning without the building, thus the inseparable character is established, in the light of the observation of the Supreme Court. The Supreme Court has observed that, whether the letting of the building with the plant was the assessee's business or not must be judged from the point of view of the businessman. The businessman's point of view could be derived from his objects of business, which in the present case must be evident from the objects clauses of the Company's memorandum and articles of association. The main object of the Company reads as under : " To acquire by purchase and sell through lease, exchange, hire or otherwise lands and properties of any tenure or interest therein, to erect, construct houses, buildings or works of every description and pull down, rebuild, enlarge, alter, improve existing houses and buildings, to construct and appropriate any such land into and for roads, streets, gardens and other convenience and generally to deal with and improve the property of the company and to own let out and manage properties for the benefit of its members." " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from 11 Saket Community Center remains income from property simpliciter and is assessable as such only. The assessee would be entitled to all the deductions as are contemplated under sections 23 and 24 of the Income-tax Act. The net income from property could be a loss as well, because, it is only when the assessee claims the blanket deduction for newly constructed residential building, that the allowable deduction cannot exceed the income. The assessee shall be entitled to all deductions such as house tax, ground rent, interest on borrowed amounts as per law, in arriving at the income from 6 Saket Community Center for the assessment year 1985-86 and 11 Saket Community Center for the assessment years 1985-86 and 1986-87. Before parting, it is necessary to make this observation that, the principle enunciated by the Calcutta High Court in Tinsukhia Development Corpn. Ltd.'s case that, the depiction of the income in the books of an assessee is irrelevant especially when the Income-tax Act has provided specific heads under which the respective income would become assessable, is not at all in dispute in the present appeals. Strictly viewed, the assessee's prayer is also based o ..... 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