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TMI Blog1979 (6) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on a rental basis. The question arose as to whether the income from those sheds should be treated as income from property under s. 22 of the Income-tax Act 1961 (hereinafter referred to as " the Act "] or as business income under. s. 28 of the Act. The ITO held that as the assessee was the owner of the sheds, the income there from, should he brought to tax under s. 22 of the Act. On appeal, the AAC disagreed with him and held that the income should be computed under the head " business " under s. 28 of the Act. On a further appeal the Tribunal upheld the view taken by the AAC. At the instance of the CIT, the above question has been referred to this court. There is no dispute that the assessee was the owner of the sheds they had been let out on rent. The view of the Tribunal was that the dominant object in construction of the sheds and letting them out to several entrepreneurs was to have a ready source of supply of components Which the assessee itself might have found it inconvenient to manufacture and which it preferred the ancillary units to manufacture for it, and the leasing out of the premises in the industrial estate, therefore, was incidental to and for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessee also entered into a specific declaration to the following effect : " I, Shri.. .................. entrepreneur of Ancillary Unit No ............ in the HMT Industrial Estate do hereby solemnly declare that the drawings, layouts and other documents received by me from HMT for the products planned on my unit, will be used exclusively for the manufacture and supply of these products to HMT only and will not be made known, passed on/used for manufacture and supply of these products to any third party, firm or corporation without the prior approval of HMT in writing." Having regard to these facts the Tribunal came to the conclusion that the letting out of the sheds was not merely for the purposes of letting out the property in the capacity of an owner, but as an integral part of the activity of the assessee, viz., in securing component parts for the purposes of its own business of manufacture of machine tools. In spite of the assessee himself engaging in the manufacture of these components through its own labourers, the ancillary units were required to manufacture them for its purposes. In effect the assessee was getting the components manufactured by the ancillary units an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o selling them or turning them to account even by way of leasing them out as an integral part of its business, cannot be said to treat them as landowner but as trader. The cases which have been cited in this case both for and against the assessee-company must be applied with this distinction properly borne in mind. In deciding whether a company dealt with its properties as owner, one must see not to the form which it gave to the transaction but to the substance of the matter." This view was again reiterated in the case of S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 (SC). In that case an earlier decision of the Supreme Court in the case of East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC) was referred to but was distinguished. In Karanpura development Company's case [1962] 44 ITR 362 the Supreme Court did not specifically refer to the East India Housing and Land Development Trust Ltd.'s case, but referred to the decision in the case of commercial Properties Ltd., In re [1928] ILR 55 Cal 1057 ; AIR 1928 Cal 456, which had been followed in East India Housing case [1961] 42 ITR 49 (SC) and observed : " There, the object of the registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial design and special doors and electric fittings, but it also rendered other services to the vault holders... These vaults could only be used for the specific purpose of storing of films and other activities connected with the examination, repairs, cleaning, waxing and rewinding of the films." It was argued before the Supreme Court that s. 10 could not be applied as the assessee could not be said to be in occupation of the premises for the purposes of any concern of its own, but it was observed : " The assessee was thus in occupation of all the premises for the purpose of its own concern, the concern being the hiring out of specially built vaults and providing special services to the licensees. As observed by Viscount Finlay in Governors of the Rotunda Hospital, Dublin v. Coman [1920] 7 TC 517 (HL), ' the subject which is hired out is a complex one 'and the return received by the assessee is not the income derived from the exercise of property rights only but is derived from carrying on an adventure or concern in the nature of trade." The provisions of ss. 9 and 10 of the Indian I.T. Act, 1922, correspond to ss. 22 and 28 of the Act, 1961, the latter being in almost identic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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