9911796707
TMI Blog1980 (10) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... years, so this judgment will substantially cover the subjectmatter of the other references also. The assessee is a private limited company incorporated on 20th December, 1955, for carrying on the business of cinema and allied business. The cinema house known as " Naaz Cinema " was constructed during the accounting year ending 31st October, 1959, on a plot sub-leased from M/s. Raisina Cold Storage and Ice Co. Ltd., New Delhi. Subsequently, one Shri Hari Singh Dabra gave an interest-free loan of Rs. 1,00,000 to the assessee to meet the cost of completion of construction of the cinema. This amount was to be refunded in monthly instalments. A lease agreement was also entered into with Shri Hari Singh in accordance with which the premises toge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 ?" Mr. Verma, learned counsel for the revenue, urges that this case is more or less covered by a recent decision of this court decided on 19th September, 1980, viz., Addl. CIT v. Rajindra Flour Allied Industries P. Ltd. delivered in ITR No. 50 of 1974, [1981] 128 ITR 402, in which most of the case-law on the subject has been referred to. The question we have to determine is whether, in the circumstances of the present case, the income from letting out the cinema has to be treated as a " business income " or as income from " other sources ". It was observed in the aforementioned judgment that the factory had been let out because the assessee in that case was unable to run the business of the factory itself. There was an intention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the building. At the same meeting, it was decided that the cinema premises duly furnished and decorated along with restaurant, cycle stand, car park and with all equipment, furniture, etc., should be leased out for a period of ten years with an option to renew for a further period of ten years at a monthly rent of Rs. 10,000.. The lease commenced from a date one week after the obtaining of the licence necessary for running the cinema. Thus, the loan of Rs. 1,00,000 and the lease was an inter-related transaction. It would appear that probably the assessee-company was short of funds necessary for completion of the building and had entered into the agreement to get the interest-free loan to complete the building and probably the loan was give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1952, for running the cinema. Thirdly, clauses 3, 5, 7, 10,11, 12 and 14 of the lease deed showed that the assessee intended to use the property for business purposes. These clauses may be shortly referred to for convenience here. Clause 3 shows that the rent of Rs. 10,000 included a licence for the use of cycle stand, car parking area and furnished restaurant. Clause 5 shows that the ground rent, insurance charges and other taxes have to be met by the lessors. Clause 7 shows that ordinary wear and tear has to be paid for by the lessee but replacement of equipment is the responsibility of the assessee-company. Clause 10 shows that no alteration can be made in the building and equipment by the lessee, it can only be done with the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cinema comes from the charges paid by the customers for seeing the film. Even if the assessee-company ran the cinema itself, it would have nothing more to do than to screen the film and collect the charges. Generally, in such cases, a fixed, weekly or monthly return is paid to the cinema owner. Virtually, the same position is achieved by the assessee-company by letting the same to another on a fixed income basis. This is the general way in which cinemas are usually run except when a cinema is given for a short period to various distributors or producers of cinematograph films on return basis. It cannot be said that any special expertise is necessary for operating the cinema machine. All that a cinema requires is a person to run the proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase deed and the nature of the exploitation. It would appear that both these judgments would support the assessee in the present case. The main judgment against the contention of the assessee and supporting the Commissioner is the Supreme Court's decision in Sultan Brothers P. Ltd. v. CIT [1964] 51 ITR 353, in which case a hotel which had been set up by the assessee was let out on a monthly rent. On a consideration of of the lease in that particular case, it was held that the intention of the lessee was to enjoy the rent from the building. The assessee was not running the business through the agency of another, but was merely enjoying the rent from the building and furniture. This case is clearly distinguishable by the very fact that unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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