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TMI Blog2014 (8) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2007 - - - Dated:- 5-8-2014 - Ranjit More And U. V. Bakre,JJ. For the Petitioner : Mr. A. F. Diniz For the Respondent : Ms. Asha Dessai JUDGMENT (Per Ranjit More, J.) Heard learned Counsel appearing on behalf of the respective parties. 2. Both the appeals arise out of the common order dated 10/01/2007 passed by the Income Tax Appellate Tribunal (ITAT) in ITA Nos. 71 and 72/PNJ/1998 and, therefore, the same are being disposed of by this common judgment. 3. Both the appeals were admitted on the following substantial question of law : Whether income received by an investment company in the course of its business, towards letting of a fully furnished office premises, is not to be assessed as business income , failing which income from other sources as claimed by the Appellant, but as income from house property as assessed by the Respondent ? 4. The assessee let out its premises on the 15th floor of Jolly Maker Chambers No. 2, Block No. III at Nariman Point, Mumbai along with four open garages, for compensation of ₹ 1,31,800/- per month for office premises and for garages and ₹ 8,000/- as hire charges for furniture, fixtures and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the office premises and four garages was agreed at ₹ 1,31,800/- per month and hire charges for the furniture, fixtures and fittings were ₹ 8,000/-. The total compensation of ₹ 1,39,800/- under the Agreement was to be paid by Salgaoncars to the appellant on or before 15th day of the month following the month for which it relates. Mr. Diniz, referring to the schedule of the said Agreement, submitted that the intention of the parties was to let out the office premises and the furniture together. Mr. Diniz submitted the appellant is not pressing that the said income should be assessed as business income. He, however, submitted that the said income should be assessed from the head income from other sources under Section 56(1) of the Income Tax Act, 1961 ('the Act', for short). He relied upon the decision in Sultan Brothers (P) Ltd. Vs. Commissioner of Income Tax reported in (1964) 51 ITR 353 (SC) and the decision of Madras High Court in Commissioner of Income Tax Vs. P. Andal Ammal reported in (2001) 117 Taxman 747 (Madras). 8. Ms. A. Dessai, learned Counsel for the Revenue supported the impugned order and opposed the appeals vehemently. She sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the head of income from other sources. Ms Dessai, on the contrary, asserted that the above provision has no application in the present facts and circumstances of the case and income received by the appellant by way of rent from office premises and furniture ought to be required to be assessed under Section 22 of the Act under the head of income from house property. Ms Dessai submitted that the provision of Section 22 of the Act is the rule and clause (iii) of Section 56(2) of the Act is an exception. She submitted that if the case falls under Section 22 of the Act, then, there is no question of application of clause (iii) of Section 56(2) of the Act. 13. The Constitution Bench in Sultan Brothers (P) Ltd. (supra), had an occasion to consider the provisions of Sections 9, 10 and 22 of Income Tax Act, 1922 which provisions are pari materia with Sections 22, 28 and 56 of the Income Tax Act, 1961. In the said case, the appellant therein was limited a company and was the owner of a building fitted with furniture and fixtures for being run as a Hotel. By the lease dated 30/08/1949, the appellant let out the building fully equipped and furnished to Voyantzis for a term of six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent CIT 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 contention that inseparable in the sub-section means that the plant, machinery or furniture are affixed to a buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision Bench of Madras High Court, in similar facts, held that the intention of the parties was that though there were two separate leases in respect of furniture and the building, both the species of the properties were enjoyed by payment of one lump sum which also gave indication that letting of the building and letting of the furniture was one letting. The Division Bench found that the assessee would not have let out the building alone without the lease of furniture or other amenities and one did not exist without the other. Consequently, the Division Bench held that the proper head of income would be income from other sources. The decision of the Division Bench of the Calcutta High Court in Shabhu Investment (P) Ltd (supra), is confirmed by the Apex Court in Civil Appeal No. 6459 and 6466 of 2001 i.e. Shabhu Investment (P) Ltd Vs. CIT reported in (2003) 263 ITR 143 (SC). The Apex Court refused to interfere in the conclusion arrived at by the Calcutta High Court on the question framed under Section 56(2) of the Act and, therefore, Civil Appeals came to be dismissed. The question fell for consideration before the Division Bench of Calcutta High Court was whether the income de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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