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TMI Blog1985 (8) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... equest of the Bench constituted a Special Bench for deciding the following question: Whether, on the facts and in the circumstances of the case, the income from lease of the property has to be assessed as income from property under section 22 and the income from provision of air-conditioning services would be assessable under the head 'Income from other sources' (under section 56 of the Income-tax Act, 1961)? 3. The assessee along with other co-owners acquired leasehold rights over a plot of 1500 sq. yds. and entered into an agreement with the Siemens India Ltd. on 22-6-1970. According to the said agreement, the assessee agreed to construct a building for office premises for the use of the lessees on the said land with all the amenities described in the agreement and demised the same along with such amenities on the terms and conditions agreed to. One of the stipulation in agreement was that it shall provide window type air-conditioners and the lessee shall pay the rent for the building at specified rate. It was further provided that in addition to the rent payable the lessee shall pay air-conditioning charges for the air-conditioning carpet area of the building a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his agreement. On the basis of such agreement the assessee claimed in the assessment years 1975-76 to 1977-78 that the income from property and the air-conditioning charges should be assessed as income from other sources. 6. The ITO was not satisfied with the said contention. According to him, the air-conditioners were fixed to the building and as such the entire income should be assessed as income from 'house property'. The learned AAC agreed with the said finding. 7. Before the Tribunal, the contention of the learned counsel for the appellant was that the finding of the learned AAC is not correct. The learned AAC mainly relied on the decision of the Tribunal given in the assessment years 1973-74 and 1974-75. The Tribunal while deciding the case mainly relied on the ratio of decision in the case of Dr. P.A. Varghese v. CIT [1971] 80 ITR 180(Ker.). The facts of that case are distinguishable from the facts of the present case. In that case the Hon'ble High Court on the basis of the decision of the Tribunal held there was no letting of the machinery, plant or furniture but only a letting of a building with certain amenities. On those facts, it was held that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income is defined as the total amount of the income referred to in section 5 of the Act, computed in the manner laid down in the Act. Section 14 of the Act classifies all income under several heads for the purpose of computation of the total income. That section reads as under: Heads of income Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income: A. Salaries B. Interest on securities C. Income from house property D. Profits and gains of business of profession E. Capital gains F. Income from other sources. Section 22 of the Act states what is the income chargeable under the head 'Income from house property'. Sections 24 and 25 of the Act deal with the deductions allowed in computing the income chargeable under the head 'Income from house property'. Section 26 of the Act provides that where property consisting of buildings or buildings and lands appurtenant there to is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' and also of the 'letting of the said machinery, plant or furniture'; and the said provision is only attracted if the above two things are inseparable, or, in other words, if they form part and parcel of the same transaction. 10. A similar issue came for decision before their Lordships of the Supreme Court in the case of Sultan Bros. (P.) Ltd. (supra). In that case the assessee constructed a building, fitted it up with furniture and fixtures for being run as a hotel. He then let out the building fully equipped and furnished for running a hotel and after certain ancillary, the lease provided for a monthly rent or ₹ 5,950 for the building and a hire of ₹ 5,000 for the furniture and fixtures. The assessee claimed that whole income received under the lease fell under sub-section (4) of section 12 of the Indian Income-tax Act, 1922 and that it should be assessed as income under the head 'Income from other sources'. The income-tax authorities disallowed the claim holding that the rent received from the building was assessable under the head 'Income from house property' and that the rent received on account of furniture and fixtures alone was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This view also provides a justification for taking the case of the income from the lease of building out of section 9 and putting it under section 12 as a residuary head of income. In then become a new kind in income, not covered by section 9 that is income not from the ownership of the building alone but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it. (p. 363) 11. We may point out that it is not the case of the revenue that air-conditioning plant is not a plant or machinery but for the sake of clarity we may point out that air-conditioning plant does come within the definition of the word plant or machinery. In the decision in the case of Taj Mahal Hotel (supra), their Lordships interpreted the meaning of the word 'plant'. Their Lordships accepted that this word was interpreted in the case of Yarmouth v. France [1887] 19 QB 647. According to that meaning 'plant' includes whatever apparatus or instruments are used by a businessman in carrying on his business. Their Lordships of the Supreme Court observed as under: The heating installation job a building may be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounded by a red coloured boundary line together with the said building to be constructed thereon according to the specifications and in the manner and with the amenities hereafter recited. According to clause 6 of the said agreement, the building shall be constructed by the lessors for the use of the lessees and shall be constructed in accordance with the building plants and designs submitted or approved by the lessees from time to time and it shall be the liability and responsibility of the lessors to have the said plans and designs approved and sanctioned by the Delhi Municipal Corporation or other authorities and to do all such acts, deeds, matters and things in connection with the same or in connection with the constructions of the said building or any part thereof at the lessor's own cost. The lessors hereby further expressly agree with the lessees that the construction work of the said building and other structures thereon shall commence on 1-8-1970 and the same shall be completed within a period of one year from that date. The lessors shall complete the construction of the said entire building and other structures thereon together with the central air-conditioning plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with appurtenances, etc., at B-5, Jangpura, Mathura Road, New Delhi. It further provides as under: And whereas the owners have, at the request of the hirers provided, in their building bearing plot No. B-5, Jangpura, Mathura Road, New Delhi, one central air-conditioning plant having a capacity of 43 tons together with other fixtures and fittings for, the purpose of supplying cool and hot air in the said building to the hirer and have also provided 12 Nos. window type air-conditioners for the purpose of supplying cool air in the cabins and rooms in the said building. And whereas the owners have also agreed to maintain and keep in proper working condition the said air-conditioning plant, fixtures and fittings and 12 Nos. window type air-conditioners and to replace any machinery or any part thereof which may need replacement or repairs. It further provides as under: The owners hereby undertake to run, operate and maintain a central air-conditioning plant of 46 tons capacity, fixtures and fittings so as to distribute as per the requirement of the hirer cool or hot air over an area 11,508 sq. ft. and 12 Nos. windows type air-conditioners to distribute cool (not hot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 56(2)(iii). 17. The contention of the revenue that the assessee has accepted the finding of the learned AAC that income from building should be assessable under section 22/26 as such the income from air-conditioning plant should also be assessable under the said provision, can hardly be accepted. Whether the income from building is assessable under section 22/26 or under section 56(2)(iii) is not before us for decision. Under the circumstances, any finding given by the income-tax authorities on that point will not come in our way in deciding the controversy in respect of the income arising from air-conditioning plant. 18. The other contention of the revenue that since the Tribunal in the assessment years 1973-74 and 1974-75 has already held that income from building and air-conditioning plant should be assessed under the head 'income from house property' and as such the same finding may be given in these years is also not acceptable to us. After considering all the facts and the relevant decision on the subject, we are of the view that we are unable to agree with the view of the Tribunal taken by it in the assessment years 1973-74 and 1974-75. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditioning facility at the rate of 20 paise per sq. ft. and labour the rate was raised to 50 paise for sq. ft. The lessees paid the charges of electricity and water consumed for the purpose of providing the air-conditioning facility. The air-conditioning facility had to be maintained by the co-owner. Rejecting the claim of the assesses that the rent from the building should be assessed as income from property under section 26 and that income realised from the air-conditioning facility should be assessed as income from other sources under section 56, the ITO held that entire income should be assessed as income from other sources under section 56(2)(iii). The Tribunal also took the same view. On a reference, the court held that in there instant case even though there was some reference to the provision of air-conditioning facility in the correspondence which preceded the lease deed, there was no reference to it in the lease deed. The leases was not maintaining the air-conditioning plant. They were only paying for the provision of air-conditioning facility on the basis of the floor area for which the amenity was provided. The air-conditioning plant was under the control of the co-ow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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