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TMI Blog1990 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of business ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from letting out furniture to the managed companies should be assessed under the head 'Profits and gains of business or profession' and not under the head 'Income from other sources' ?" The facts leading to the reference are stated hereinafter. At the relevant time, the assessee was the managing agent, secretaries and treasurers of a number of limited companies. The assessee-company also dealt in jute goods. The assessee-company owns a building at No. 3, Netaji Subhas Road, Calcutta, wherein the registered office is located. This is a four-storeyed building and the assessee-company was occupying the ground floor and the second floor of the said building for its own business purposes. The rest of the building, with the exception of two rooms on the ground floor, which were let out to D. L. Millar and Co Ltd., was occupied by the various managed companies, which were more than 20 in number. The case of the assessee all along has been that the rental income derived by it from letting out a portion of its property at No. 3, Netaji Subhas Road, Calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Tribunal to make a reference to this court in respect of the assessment year 1961-62, but the same was declined by the Tribunal in R. A. Nos. 80 and 81/(Cal) of 1971-72 by its order dated July 24, 1971. In the assessment year 1964-65, which is involved in the present reference, the Income-tax Officer had decided the aforesaid matter against the assessee, following his earlier orders and he assessed the rental income from the property at No. 3, Netaji Subhas Road, Calcutta, under the head "Income from house property". The rental income from furniture was, however, assessed under the head " Income from other sources ". In making such assessments, the Income-tax Officer also disallowed proportionate expenses pertaining to the property at No. 3, Netaji Subhas Road, Calcutta, let out to the managed companies, which was claimed as deductible in computing business income under the head "Profits and gains of business or profession". When the matter came before the Appellate Assistant Commissioner, he by his order dated May 6, 1971, held that the rental income received from the managed companies should be treated as business income. He also deleted the disallowance of proportiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business activities and its income arising therefrom was assessable under section 10 of the Indian Income-tax Act, 1922. (b) In Kanak Investments (P.) Ltd.'s case [1974] 95 ITR 419 (Cal), this court held that, where composite rent is received by an assessee from its tenants, it should be split up and only the amount attributable to the building should be computed as income from house properties and the amount attributable to the amenities provided to the assessee should be assessed as "Income from other sources". It may be noted that the question referred to this court did not envisage any enquiry as to whether any portion of such income was assessable as business income and no arguments were at all advanced before this court in regard to assessment of any portion of the rental income as business income. (c) In Indian City Properties Ltd.'s case [1978] III ITR 19 (Cal), it was found that the assessee-company derived the income from letting out house properties. It also received lift charges and air-conditioning charges.. The Tribunal had held that the entire rent received was assessable under section 22 of the Income-tax Act, 1961, as income from house property. This court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the carrying on of all these activities amounted to the carrying on of a business and the income derived from the same was business income. The court also referred to the decision of this court in Indian City Properties Ltd.'s case [1978] 111 ITR 19 (Cal), and held that that case was not relevant inasmuch as the only question raised there was whether certain income could be regarded as income from property or income from other sources. The question as to whether the income in question was assessable as business income was not considered at all and no argument's were advanced in that connection. (f) In Russell Properties (P.) Ltd.'s case [1982] 137 ITR 473 (Cal), this court was concerned with the question whether the income derived by the assessee-company by way of service and maintenance charges was assessable as business income. The court found that the various services rendered by the assessee-company in that case partook of the nature of an organised business activity conducted in a systematic manner, the services rendered were complex and not merely incidental to the ownership of the property. It was, therefore, held that the receipts in question were assessable as busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78] 114 ITR 388 (MP). (d) Addl. CIT v. Hindustan Machine Tools Ltd. [1980] 121 ITR 798 (Kar). (a) In Jamshedpur Engineering and Machine Mfg. Co. Ltd.'s case [1957] 32 ITR 41, the Patna High Court noted that the assessee-company which was carrying on business of manufacturing and selling agricultural implements had constructed residential quarters for its employees. These quarters had been let out to the employees as incidental to the main business carried on by the assessee-company. The question before the High Court was whether the expenses incurred by the assessee-company for repairs and maintenance of the residential quarters was incidental as business income. The court held that as the letting out of residential quarters was subservient to and incidental to its main business, section 9 of the Indian Income-tax Act, 1922, corresponding to sections 22 and 23 of the Income-tax Act, 1961, did not apply and the expenditure incurred by the assessee-company for the repair and maintenance of the residential quarters was allowable as a deduction in computing the business income under section 10(2)(xv) of the 1922 Act corresponding to section 37 of the Income-tax Act, 1961. (b) In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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