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TMI Blog1970 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... n set for an answer by this court in this reference is as follows : " Whether, on the facts and in the circumstances of the case, on a proper construction of the indenture of lease dated 28th October, 1957, the Tribunal was right in holding that the entire rental income from premies No. 8, Clive Row, Calcutta, should be assessed under section 12 of the Income-tax Act, 1922 ?" The facts of the case giving rise to this question are as follows : The assessment year is 1961-62 for which the corresponding accounting year in this case is the calendar year 1960. The assessee is an investment and property holding company managed by Andrew Yule Co. Ltd. During the accounting year the company owned, inter alia, three properties, namely, No. 8, Clive Row, 243, Upper Chitpore Road, and No. 62, Hazra Road, all in the town of Calcutta. By an indenture of lease dated the 28th October, 1957, the assessee-company leased premises No. 8, Clive Row, to a number of companies managed by Andrew Yule Co. Ltd. The deed records that in consideration of the rent reserved and other covenants and conditions, the landlord demised unto the tenants, 8, Clive Row, together with the compound, garage, outh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this reference under section 66(1) of the Indian Income-tax Act, 1922. Section 12(4) of the Income-tax Act, 1922, reads as follows : " Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, he shall be entitle to allowances in accordance with the provisions of clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10 in respect of such buildings." The word "inseparable" is used in the above section. The Tribunal has found on the facts of this case and on the reading of the lease that in the instant reference the letting of the fixtures, plant and machinery in this case was inseparable from the letting of the building within the meaning of this statutory provision. Section 12(4) of the Income-tax Act, 1922, was introduced by the Indian Income-tax (Amendment) Act, 1941 (23 of 1941). Prior to that section 12(3) of the Income-tax Act, 1922, was introduced by the Indian Income-tax (Amendment) Act, 1939 (7 of 1939), and which reads as follows : " Where an assessee lets on hire machinery, plant or furniture belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as one and inseparable. Lastly, there are no separate leases for these two lettings but one lease for each of the 39 tenants who are held jointly and severally liable by clause 2 of the lease indicating that it is one and inseparable letting. We have, therefore, no hesitation in holding that, in the facts and circumstances of this reference and on the express terms and conditions of the lease, the letting of the building and the letting of the fixtures, fittings and air-conditioning plants are "inseparable" within the meaning of that word used in section 12(4) of the Indian Income-tax Act, 1922. Dr. Pal for the assessee then drew a distinction between the expression "machinery, plant or furniture" used in section 12(4) of the Indian Income-tax Act, 1922, and the expression "fixtures, fittings and air-conditioning plants" used in the lease. The point of his submission was that these two expressions did not mean the same thing. In support of this argument, he drew our attention to the 3rd schedule of the lease which describes the property list under the following broad classifications : " 1. Air-conditioners : portables. 2. Air-conditioners : fixed plants. 3. Tubewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a tax case but, prima facie, the ordinary meaning of the word 'machinery'--and the word 'machinery' is an ordinary and not a technical word-must, unless there is something in the context, prevail in the Indian Income-tax Act also." We, therefore, both on the facts and on the authority as discussed above, hold that although the lease uses the expression "fixtures, fittings and air-conditioning plants" they include items which are obviously plant and machinery within the meaning of section 12(4) of the Indian Income-tax Act, 1922. The controversy then began about the applicability of section 9 or section 12 of the Income-tax Act on this point. The revenue contends that this is an income from property and should come under section 9 of the Indian Income-tax Act. The assessee contends that it should come under section 12 of the Indian Income-tax Act relating to "other sources". This competition between section 9 and section 12 is quite a complex problem in this branch of the law. The simple argument for the revenue is that this property is 8, Clive Row, and the income is an income of rent from this property. Therefore, section 9 of the Indian Income-tax Act dealing with "p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it follows that section 9 cannot be attracted to the facts of the case because it only speaks of lands and buildings. Therefore, it follows also that this is an "income, profits and gains. . . . " which is "not included under any of the preceding heads" within the meaning of those expressions used in section 12 of the Act. In other words, our conclusion is that rent or hire for letting out or hiring machinery, plant or furniture can only be put under section 12 of the Act, on the ground that is not covered by section 9 so far as this case is concerned which is confined to only land and buildings. This, in our view, is supported by the express words used in section 12(4) of the Act such as (1) assessee lets on hire, (2) machinery, plant or furniture, (3) buildings, and (4) the letting of the building inseparable from the letting of the machinery. When these tests are applicable, section 12(4) of the Act says the assessee will be entitled to allowances "in accordance with section 10(2)(iv), (v), (vi) and (vii)". Therefore, section 12(4) of the Act includes letting on hire machinery, plant or furniture combined with letting of building and where the two lettings are inseparable. Suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on." There in that case the question was also involved whether section 10 relating to business had any applicability, and, therefore, there was this discussion whether the letting was a part of the business itself or not and what was being used was a commercial asset from that point of view. No such question, however, arises in the instant reference before us and there is no argument to suggest that section 10 has at all any application to this case. As the Supreme Court observes at pages 359-60 of that report that the assessee never carried on any business of a hotel in the premises let out in that case. Nor was there anything to show in that case that it intended to carry on a hotel business itself in the same building and therefore, the income under the lease in the Supreme Court case could not be assessed under section 10 of the Act as the income of that business. Having disposed of this argument on section 10 of the Indian Income-tax Act, 1922, the Supreme Court proceede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant reference before us are : (1) Intention is the test of inseparability, and (2) that rent from building let out along with the machinery is a residuary head of income, Applying the ratio of the Supreme Court decisions we are bound to hold that, in the facts and circumstances of the reference before us, the entire rental income from premises No. 8, Clive Row, must be assessed under section 12(4) of that Act. Mr. Sen, appearing for the revenue, submitted that this decision of the Supreme Court has not really been followed in a subsequent case called Nalinikant Ambalal Modi v. Commissioner of Income-tax, where he said that the majority judgment did not refer to this decision at all but the minority judgment did. The majority judgment was delivered by the same learned judge who delivered the judgment in Sultan Brothers case quoted above. Reading the judgment in Nalinikant Ambalal's case we do not think that Mr. Sen's submission is correct and we do not find that the subsequent Supreme Court decision either expressly or impliedly was against the previous Supreme Court decision. For these reasons, we are of the opinion that the Tribunal was right in holding that the entire renta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been rightly assessed under section 9 as the rental income from premises No. 62, Hazra Road, even for the period subsequent to the 8th January, 1960 ?" The first question relates to 8, Clive Row, whose facts have already been stated in our judgment in Income-tax Ref. No.. 102 of 1967. Dr. Pal appearing for the assessee did not press this question because the Tribunal did not decide this point. The relevant observation of the Tribunal on the point is as follows : "...... In view of this conclusion, we must direct that the income from premises No. 8, Clive Row, should be assessed under section 12, after allowing all the deductions available under that sub-section." Therefore, the Tribunal did not decide the point raised in question No. 1 but left it open. We, accordingly, do not answer this question. Question No. 2 raises certain facts which are special to this reference and relates to premises No. 62, Hazra Road. We think that so far as 62, Hazra Road, is concerned and having regard to the facts and circumstances relating to this premises and having regard to the decision of the Division Bench in Income-tax Ref. No. 68 of 1965 in Commissioner of Income-tax v. Ganga Propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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