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TMI Blog2002 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ee will be entitled to permissible deduction as income from house property to the extent for which the property is used and also deduction permissible under the head "Income from business" as we have held the said income as income from business. X X X X Extracts X X X X X X X X Extracts X X X X ..... lectrical installations, (xi) Providing special facilities for external telephones and telex. It may be noted that up to the assessment year 1972-73 the rental income from the said properties, was shown under the head "Income from house property" and was taxed as such. In the accounting year 1971-72, i.e., the previous year relevant to the assessment year 1972-73, the assessee-company started providing various services to its tenants. The service agreements which have been referred to above are on record. It is the case of the assessee that by virtue of the said agreements the assessee provided certain facilities to its tenants over and above the possession of the properties in question. Previous background: However for the assessment years 1972-73 and 1973-74 income was returned under the head "Income from house property". In the assessment year 1973-74, the assessee-company during the course of assessment proceedings requested the Income-tax Officer (hereinafter referred to as "the ITO") to tax the income from service charges under the head "Income from business". The Income-tax Officer rejected this claim of the assessee which was upheld by the Appellate Assistant Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from property let out to the tenants, the Tribunal held that the same is income from house property. As regards income from other sources, the Tribunal relying on the judgments of the Supreme Court in the cases of CIT v. National Storage Pvt. Ltd. [1967] 66 ITR 596 and Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 upheld the decision of-the Commissioner of Income-tax (Appeals) and held that the income from service rendered would be assessable as income from other sources. As regards other aspect regarding repairs, the Tribunal has held that the same is allowable under section 22 of the Act. As regards depreciation, the Tribunal held that depreciation is not allowable under section 57 of the Act. In view of the said order of the Tribunal, both the Revenue and the assessee have referred the aforesaid questions for the opinion of this court. Learned counsel for the assessee, Mr. Bhargav D. Karia, has contended that where the property which is let or given on licence is not a bare tenement but is a complex one, e.g., a well-equipped building including special devices, facilities and services or an air-conditioning plant or well furnished paying guest establishment, or sheds w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Schedule D. The case of Governors of the Rotunda Hospital, Dublin v. Coman [1921] 1 AC 1 (HL) is an excellent example. There, as Lord Chancellor Lord Birkenhend pointed out at page 8, the arrangements between the owners of the premises and the persons who paid for their use for the purpose of entertainments were not such as to constitute the relation of landlord and tenant, and the owners remained in possession and occupation of their property." On page 553, the Supreme Court has further observed as under: "The receipts derived from hiring out their premises along with various movable fittings, and affording services in the way of heating, lighting and attendance, were receipts of an enterprise quite distinct from the ordinary receipts which a landlord derives from letting his property." Learned counsel for the assessee has relied on the Division Bench judgment of this court in the case of CIT v. Amora Chemicals Pvt. Ltd. [2002] 258 ITR 519; [2002] 178 CTR 64. This court (Coram : A.R. Dave and D.A. Mehta JJ.) on pages 67 and 68 at para. 10 has observed as follows: "Having heard both these parties and after taking into consideration the orders of the Tribunal, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various services to the tenants, those profits and gains may be chargeable under section 28 as income from business, apart from the assessment under this section in respect of the income from house property. Thus, if an owner holds a property for a business purpose and receives from his tenants rents which include charges for supplying various services, the owner would be chargeable under this section in respect of the annual value of the property and under section 28 in respect of the profits he makes by rendering the services to the tenants. Income from house property--Notional income: The Income-tax Act deals with cases of "notional" income which may be contradistinguished from real income and the aptest illustration is found in the taxation of income from house property, especially self-occupied properties. "Income from house property" is an artificially defined income and the liability arises from the fact that the assessee is the owner of the property. The word "business" has been defined in section 2(13) of the Income-tax Act, 1961, to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. This definition, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee should be taxed as income from house property and all permissible expenditure incurred by the assessee or the expenditure deemed to have been incurred by the assessee as allowable under the Act should be deducted from the income of rent. Looking to the said fact, the assessee cannot claim depreciation on the value of the buildings. Thus, the deductions, which are permissible can only be allowed in respect of the rent. So far as the income received by the assessee for rendering other services to the tenants are concerned, the said income should be treated as income from business. All expenditures which are permissible under the provisions of sections 32 to 38 of the Act should also be deducted from the income so received. Thus, the activity of rendering services to the tenants should be treated as a business and as such all expenditure incurred for the purpose of rendering such services should be allowed as deduction to the assessee. We therefore opine that the income which the assessee has received towards rent from the property leased by it should be treated as "income from house property" whereas income received by the assessee towards different services rendered to the ..... 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