{"id":25407,"date":"1963-12-06T00:00:00","date_gmt":"1963-12-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sultan-brothers-p-ltd-vs-commissioner-of-income-tax-on-6-december-1963"},"modified":"2017-07-27T14:30:17","modified_gmt":"2017-07-27T09:00:17","slug":"sultan-brothers-p-ltd-vs-commissioner-of-income-tax-on-6-december-1963","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sultan-brothers-p-ltd-vs-commissioner-of-income-tax-on-6-december-1963","title":{"rendered":"Sultan Brothers (P) Ltd vs Commissioner Of Income-Tax on 6 December, 1963"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Sultan Brothers (P) Ltd vs Commissioner Of Income-Tax on 6 December, 1963<\/div>\n
Equivalent citations: 1964 AIR 1389, \t\t 1964 SCR (5) 807<\/div>\n
Author: A Sarkar<\/div>\n
Bench: Sinha, Bhuvneshwar P.(Cj), Sarkar, A.K., Hidayatullah, M., Gupta, K.C. Das, Ayyangar, N. Rajagopala<\/div>\n
           PETITIONER:\nSULTAN BROTHERS (P) LTD.\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF INCOME-TAX\n\nDATE OF JUDGMENT:\n06\/12\/1963\n\nBENCH:\nSARKAR, A.K.\nBENCH:\nSARKAR, A.K.\nSINHA, BHUVNESHWAR P.(CJ)\nHIDAYATULLAH, M.\nGUPTA, K.C. DAS\nAYYANGAR, N. RAJAGOPALA\n\nCITATION:\n 1964 AIR 1389\t\t  1964 SCR  (5) 807\n CITATOR INFO :\n RF\t    1967 SC 193\t (22)\n R\t    1972 SC2315\t (13)\n\n\nACT:\nIncome Tax-Assessment-Letting of building and furniture-Such\nletting, if business-Income Tax Act, 1922 (11 of 1922),\t ss.\n10, 12(4).\n\n\n\nHEADNOTE:\nThe appellant assessee let out a building fully equipped and\nfurnished,  for a term of six years for running a hotel\t and\nfor  certain ancillary purposes.  The lease provided  for  a\nrent  for  the\tbuilding and a hire for\t the  furniture\t and\nfixtures.   In the assessment of the income under the  lease\nto income-tax,\n Held:\t  Whether a particular letting is business has to be\ndecided in the circumstances of each case.  It would not  be\nthe doing\n808\nof  a business if it was exploitation of his property by  an\nowner.\t A thing cannot by its very nature be  a  commercial\nasset.\t A  commercial\tasset is only an  asset\t used  in  a\nbusiness  and  nothing else.  An activity  is  not  business\nbecause\t it is concerned with an asset with which  trade  is\ncommonly carried on.\nThe  present letting of the building did not amount  to\t the\ndoing  of a business by the assessee and as such the  income\nunder  the  lease could not be assessed under s. 10  of\t the\nIncome-tax Act as the income of a business.\nCommissioner  of Income-tax v. Mangalagiri Sri\tUmamaheswara\nGin  and  Rice Factory Ltd. (1927) I.L.R. 50  Mad.  529\t and\nCommissioner of Income-tax v. Basotto Brothers Ltd.  Madras.<\/a>\n(1940) 8 I.T.R. 41, distinguished.\nUnited\tCommercial Bank Ltd. v. Commissioner of\t Income-tax,\nWest Bengal,<\/a> 32 I.T.R. 688. referred to.\nEven if the object of the assessee, a company, which was  to\nacquire\t lands and buildings, and to turn them into  account\nby leasing, be assumed to be a business activity, that would\nnot turn the income from the lease to income from business.\n   East Indian Housing & Land Development Trust Ltd. v. Com-\nmissioner of Income-tax, (1961) 42 I.T.R. 49, relied on.\n  The income from the hire of the furniture and fixture\t was\nassessable  under s. 12 of the Act after providing  for\t the\nallowances mentioned in sub-s. (3) of that section.\n  Sub-section  (4) of s. 12 is not confined to a case  where\nthe  building let out does not belong to the person who\t let\nit out.\n The income contemplated in sub-s. (4) of s. 12 is an income\nwhich  does  not  come within any of  the  earlier  sections\ndealing with specific heads of income.\nIn  order  that\t sub-s. (4) of s. 12 may apply,\t it  is\t not\nnecessary that the primary letting must be of the machinery,\nplant or furniture and together with such letting there is a\nletting of the building.\n  When\tsub-s.\t(4) of s. 12 says that \"the letting  of\t the\nbuildings  is  inseparable  from the  letting  of  the\tsaid\nmachinery,  plant  or  furniture\" it  only  means  that\t the\nparties\t to the letting must have so intended.\tThere  would\nbe  such an intention when they were intended to be  enjoyed\ntogether.\n\n\n\nJUDGMENT:\n<\/pre>\n
  CIVIL.  APPELLATE  JURISDICTION : Civil Appeal No.  63  of
\n1961.\n<\/p>\n
Appeal from the judgment and order dated July 2,1959, of the
\nBombay High Court in Income-tax Reference No. 59\/1958.\n<\/p>\n
809<\/span><\/p>\n
A.V. Viswanatha Sastri, T.S. Diwanji, O.C. Mathur,     J.B.
\nDadachanji and Ravinder, for the   appellant.
\nK.N. Rajagopal Sastri and R.N. Sachthey, for the  respondent.
\nDecember 6, 1963.  The Judgment of the Court was  delivered
\nby.\n<\/p>\n
SARKAR\tJ.-The appellant, which is a limited company is\t the
\nowner of a certain building constructed on Plot No. 7 on the
\nChurch\tGate  Reclamation in Bombay which it had  fitted  up
\nwith furniture and fixtures for being run as a hotel.  By  a
\nlease  dated  August  30, 1949, the appellant  let  out\t the
\nbuilding fully equipped and furnished to one Voyantzis for a
\nterm of six years certain from December 9, 1946 for  running
\na hotel and for certain other ancillary purposes.  The lease
\nprovided  for a monthly rent of Rs. 5,950 for  the  building
\nand a hire of Rs. 5,000 for the furniture and fixtures.\t The
\nquestion  in this appeal is how the income received as\trent
\nand hire is to be assessed, that is, under which section  of
\nthe  Income-tax Act, 1922 is it assessable.   The  appellant
\ncontends that the entire income should be assessed under  s.
\n10  as the income of a business or, in the alternative,\t the
\nincome\tshould\tbe  assessed under s. 12 as  income  from  a
\nresiduary  source,  that is, a source not specified  in\t the
\npreceding sections 7 to 11, with the allowances respectively
\nspecified in sub-ss. (3) and (4)   of that section.
\nFor  the  assessment year 1953-54, the appellant  was  taxed
\nunder s. 9 of the Income-tax Act in respect of the  building
\nand  under  s. 12 in respect of the hire received  from\t the
\nfurniture  and fixtures.  The Income-tax Officer  held\tthat
\nthe  building  had to be assesses under s. 9 as it  was\t the
\nspecific  section  covering is and there was,  therfore,  no
\nscope  for  resorting to the residuary section,\t s.  12,  in
\nrespect of its income.\tThe Appellate Assistant Commissioner
\nheld  on appear that the rent from a building could only  be
\nassessed under s. 12 with the allowances mentioned in sub-\n<\/p>\n
810<\/span><\/p>\n
s.   (4) where for the letting of the furniture and fixtures
\nit  was indispensable to let the building also and  as\tthat
\nwas not the case here the building had been rightly assessed
\nunder  s. 9 . The appellant then appealed to the  Income-tax
\nAppellate Tribunal.  The Tribunal confirmed the decision  of
\nthe authorities below holding that the allowances  mentioned
\nin  sub-s.  (4) of s. 12 could not be allowed  as  the\tsub-
\nsection\t permitted  them  only\twhere  the  letting  of\t the
\nbuilding was incidental to the letting of the furniture\t and
\nfixtures  and as that had not happened in the  present\tcase
\nthe  rent  could not be assessed under s. 12.  It  was\talso
\ncontended by the appellant before the Tribunal–a contention
\nwhich  does not appear to have been advanced at any  earlier
\nstage-that  the\t entire\t income\t should\t really\t have\tbeen
\nassessed under s. 10 of the Act inasmuch as the income taxed
\nwas  from  “the letting out of the totality  of\t the  assets
\nwhich  was  the\t business of the  assessee”.   The  Tribunal
\nrejected this contention also, holding that since there\t was
\na  specific head in regard to income from property,  namely,
\ns. 9, the income from the property leased had to be computed
\nunder  that section alone and referred to United  Commercial
\nBank  Ltd. v. Commissioner of Income-tax, West Bengal<\/a>(1)  in
\nsupport of this view.\n<\/p>\n
Thereafter  at\tthe request of the  appellant  the  Tribunal
\nstated a case under s. 66(1) of the Act to the High Court at
\nBombay for decision of the following question:-\n<\/p>\n
\t      “Whether on the facts and circumstances of the
\n\t      case,  the income derived from letting of\t the
\n\t      building constructed on Plot No. 7 is properly
\n\t      to  be computed under section 9, 10  or  under
\n\t      section 12 of the Income -tax Act.”\n<\/p><\/blockquote>\n
The High Court answered the question as follows:—\n<\/p>\n
\t      “The income from the building will be computed
\n\t      under  section  9, income from  furniture\t and
\n\t      fixtures under section 12(3) and that no\tpart
\n\t      of the income is taxable under section 10.”\n<\/p><\/blockquote>\n
(1)  32 I.T.R. 688.\n<\/p>\n
811<\/span><\/p>\n
The question framed is clearly somewhat inaccurate for\twhat
\nthe  appellant\tcon-tends  in the first place  is  that\t the
\nentire\tincome and not that from the building alone,  should
\nbe  assessed under s. 10.  This inaccuracy has\tnot  however
\nmisled\tanyone\tand  the matter has been  argued  before  us
\nwithout any objection from the respondent on the basis as if
\nthe question was in terms of the appellant’s contention.
\nNow,  it is beyond dispute that the several heads of  income
\nmentioned  in s. 6 of the Act and dealt with  separately  in
\nss. 7 to 12 are mutually exclusive, each head being specific
\nto  cover  the income arising from a particular\t source\t and
\nthat  it  cannot be said that any one of these\tsections  is
\nmore specific than another-. see United Commercial Bank Ltd.
\nv.  Commissioner of Income-tax(1).  Therefore  a  particular
\nvariety\t of  income must be assignable to one  or  other  of
\nthese sections.\n<\/p>\n
A broad reference to ss. 9, 10 and 12 may now be  profitably
\nmade.\tSection 9 provides for the payment of tax under\t the
\nhead  “Income  from property” in respect of  the  bona\tfide
\nannual\tvalue of buildings or lands appurtenant\t thereto  of
\nwhich  the  assessee is the owner.   Certain  buildings\t are
\nexempted  but  it is not necessary to refer to\tthem.\tThis
\nsection\t also  sets out the method. of\tcalculation  of\t the
\nannual\tvalue  of  the property on which the tax  is  to  be
\nassessed.   It\tis important to note here  that\t under\tthis
\nsection\t a building has to be assessed to tax on its  annual
\nvalue  irrespective  of the rent received from it,  if\tany.
\nSection\t 10  deals  with  profits  and\tgains  of  business,
\nprofession  or\tvocation.  This section\t also  provides\t the
\nmethod\tof computing the income and the allowances that\t the
\nassessee  is entitled to deduct in making  the\tcomputation.
\nSection 12 is the residuary section covering  income,profits
\nand  gains  of every kind not assessable under\tany  of\t the
\nheads  specified earlier. It follows that if the income\t now
\nunder consideration is taxable under s. 9 or s. 10, then  it
\ncannot be taxed under s. 12.  This is not in dispute.
\n(1)  32 I.T.R. 688.\n<\/p>\n
812<\/span><\/p>\n
The  first contention of the appellant, as already seen,  is
\nthat the assessment should be made tinder s. 10 as of income
\nfrom  a\t business.  The reason for this preference  is\tthat
\nunder  that  section  it would be entitled  to\tmuch  larger
\nallowances  as deductions in the computation of\t the  income
\nthan it would be under either s. 9 or s. 12.  The  appellant
\nput  the  matter in this way.  Letting out of  a  commercial
\nasset  is  a  business\tand what it did was  to\t let  out  a
\ncommercial  asset, namely, a fully equipped hotel  building.
\nIt also said that the lessor’s covenants in the lease showed
\nthat  in making the lease, the appellant was carrying  on  a
\nbusiness  and  not letting out property.  This\tis  somewhat
\ndifferent  from\t the  way in which it  was  put\t before\t the
\nTribunal.  The argument advanced before the Tribunal was not
\nadvanced   in  this  Court  and\t need  not,  therefore,\t  be
\nconsidered.  It is indeed not very clear.\n<\/p>\n
A  very large number of cases was referred to in support  of
\nthis  contention  but  it  does not seem  to  us  that\tmuch
\nassistance  can be derived from them.  Whether a  particular
\nletting\t is business has to be decided in the  circumstances
\nof each case.  We do not think that the cases cited lay down
\na  test for deciding when a letting amounts to\ta  business.
\nWe think each case has to be looked at from a  businessman’s
\npoint of view to find out whether the letting was the  doing
\nof  a  business or the exploitation of his  property  by  an
\nowner.\tWe do not further think that a thing can by its very
\nnature be a commercial asset.  A commercial asset is only an
\nasset used in a business and nothing else, and business\t may
\nbe carried on with practically all things.  Therefore it  is
\n‘not possible to say that a particular activity is  business
\nbecause\t it is concerned with an asset with which  trade  is
\ncommonly carried on.  We find nothing in the cases referred,
\nto   support  the  proposition\tthat  certain\tassets\t are
\ncommercial assets in their very nature.\n<\/p>\n
 The object of the appellant company no doubt was to acquire
\nland  and  buildings and to turn the same  into\t account  by
\nconstruction and reconstruc-\n<\/p>\n
813<\/span><\/p>\n
tion, decoration, furnishing and maintenance of them and  by
\nleasing and selling the same.  The activity contemplated  in
\nthe  aforesaid\tobject of the company, assuming it to  be  a
\nbusiness activity, would not by itself turn the lease in the
\npresent\t case into a business deal.  That would follow\tfrom
\nthe  decision of this Court in East India Housing and-\tLand
\nDevelopment  Trust  Ltd. v.  Commissioner  of  Income-tax(1)
\nwhere  it  was\tobserved that “the  income  derived  by\t the
\ncompany\t from  shops  and stalls  is  income  received\tfrom
\nproperty and falls under the specific head. described in  s.\n<\/p>\n
9. The character of that income is not altered because it is
\nreceived  by a company formed with the object of  developing
\nand setting up markets.”\n<\/p>\n
Now  the  cases on which learned counsel for  the  appellant
\nespecially relied were cases of the letting out of plant and
\nmachinery,   in\t some  instances  along\t with  the   factory
\nbuildings  in which they had been housed.  In all  of  them,
\nexcept\tone, which we will presently mention,  the  assessee
\nhad  previously\t been  operating the factory or\t mill  as  a
\nbusiness  and had only temporarily let it out as it was\t not
\nconvenient  for him at the time to carry on the business  of
\nrunning the mill or factory.  In these circumstances, it was
\nheld  that by letting out the plant, machinery and  building
\nthe assessee was still conducting a business though not\t the
\nbusiness of running the mill or factory.\n<\/p>\n
In   Commissioner   of\t Income-tax   v.   Mangalagiri\t Sri
\nUmamaheswara Gin and Rice Factory Ltd. (2). the assessee who
\nwas  the  owner of a fully equipped rice mill which  it\t had
\nconstructed  for  its  own trade but had  never\t worked\t it,
\ndecided to lease it out to another person.  It was held that
\nthe  income was income from business.  The reason  given  by
\none  of\t the  learned Judges, Krishnan J.,  was,  “the\trent
\nreceived  is  not only for the use of the mill but  also  to
\ncover the necessary wear and tear” and the lease was of\t the
\nmill  as a working concern.  Beasley J. agreed\tbut  perhaps
\nwith a certain amount of hesita-\n<\/p>\n
(1)  [1961] 42 I.T.R. 49.   (2) [1927] I.L.R. 50 Mad. 529.\n<\/p>\n
814<\/span><\/p>\n
tion.\tIn the later case of Commissioner of  Income-tax  v.
\nBosotto\t Brothers Limited, Madras<\/a>(1) which concerned  income
\nfrom  the  letting out of a fully equipped hotel  which\t had
\npreviously  been  run by the assessee himself  as  a  hotel,
\nKrishnaswami   Ayyangar\t J.  felt  himself  bound   by\t the
\nMangalagiri Gin and Rice factory(2) and apparently for\tthat
\nreason\tonly decided to agree with his colleagues  that\t the
\ncase  might fall under s. 10.  Mockett J. thought that\twhat
\nwas done was to lease out an undertaking of a hotel known as
\na  hotel business and in that view he agreed that  the\tcase
\nmight come under s. 10.\n<\/p>\n
It seems to us that Bosotto Brothers Ltd. case(1) would have
\nno  application\t because it cannot possibly be said  in\t the
\ncase  in  hand that the appellant had let out  any  business
\nundertaking.  Admittedly it never carried on any business of
\na hotel in the premises let out or otherwise at all.  Nor is
\nthere anything to show that it intended to carry on a  hotel
\nbusiness  itself  in the same building even if\tit  had\t the
\npower  under  its memorandum to do so, as to which  a  great
\ndeal  of  doubt may be entertained. In Mangalagiri  Gin\t and
\nRice  Factory case(2), what appears to have been really\t let
\nout was the plant and machinery and the case was decided  on
\nthe basis of the wear and tear caused to them.\tFurthermore,
\nin  that  case\tit  does not appear  at\t all  to  have\tbeen
\ncontended that s. 9 had any application.  Whether that\tcase
\nwas rightly decided or not, is not a question that  properly
\narises in this case for none of the considerations which led
\nto  the decision arrived at there, exists here; there is  no
\nquestion of any wear and tear to machinery nor of a  letting
\nout   of  any  working\tconcern.   Besides,  the  cases\t  of
\nMangalagiri  Gin  and Rice Factory(2) and  Bosotto  Brothers
\nLimited(1), were both decided before sub-s. (4) of s. 12 was
\nenacted.  Sub-section (4) covers a case where a building and
\nfurniture  are inseparably let out.  It cannot be said\twhat
\nthe decision in those cases would have been if s. 12(4)\t was
\nthen in existence.  We do not think that it would be
\n(1) [1940] 8 I.T.R. 41.\n<\/p>\n
(2) [1927] I.L.R. 50 Mad. 529.\n<\/p>\n
815<\/span><\/p>\n
profitable to refer to the other cases cited at the bar\t for
\nthey carry the matter no further.\n<\/p>\n
  Learned  counsel for the appellant also relied on  certain
\nclauses\t in the lease and a clause in the memorandum of\t the
\nappellant  company  to show that the lease amounted  to\t the
\ncarrying  on  of  a business.  We shall now  turn  to  these
\nprovisions.  Clause 3(b) of the memorandum gave power to the
\nappellant to manage land, buildings, and other property\t and
\nto  supply  the tenants and occupiers  thereof\trefreshment,
\nattendants,  messengers, light, waiting-room, reading  room,
\nmeeting,  room,\t libraries,  laundry  convenience,  electric
\nconveniences,  lifts,  stables and  other  advantages.\t The
\ncontention  was that this cause in the memorandum  gave\t the
\nappellant  a power to carry on a business of the  nature  of
\nrunning a hotel.  We do not think, it did.  But in any case,
\nby  the lease none of the objects mentioned in\tthis  clause
\nwas sought to be achieved.  We find nothing in the  lessor’s
\ncovenants  to  some of which we were referred to  bring\t the
\nmatter\twithin\tcl. 3(b) of the memorandum.  None  of  these
\nclauses\t support the contention that by granting the  lease,
\nthe appellant did anything like carrying on the business  of
\nrunning\t a  hotel.   Thus cl. (a) is a\tcovenant  for  quiet
\nenjoyment.   Clause (b) provides for a renewal of the  lease
\nof  the demised premises being granted to the lessee  for  a
\nfurther term of six years at his request.  Clause (c)  deals
\nwith  payment  of municipal bills and  similar\tcharges\t and
\nground\trent.\tClause (d) provides that  the  lessor  shall
\nduring\tthe  continuance  of the lease and  on\tits  renewal
\nprovide\t various things which included\tfurniture,  pillows,
\nmattresses, gas-stoves, bottle coolers, refrigerators, lift,
\nelectric fittings and the like and also paint the outside of
\nthe  building  with  oil once in five  years  and  keep\t the
\nbuilding  insured.  These are ordinary covenants in a  lease
\nof a furnished building.  These do not at all show that\t the
\nlessor\twas  rendering\tany service in\tthe  hotel  business
\ncarried\t on by the lessee or in fact doing any\tbusiness  at
\nall.  On the facts of this case we are unable to agree that
\n816<\/span>
\nthe  letting  of  the building amounted to the\tdoing  of  a
\nbusiness.   The income under the lease cannot, therefore  be
\nassessed under s. 10 of the Act as the income of a business.
\nThe  next  question  is\t about sub-s. (4)  of  s.  12.\t The
\nrelevant part of s. 12 may now be set out.\n<\/p>\n
\t      S.    12.\t (1) The tax shall be payable by  an
\n\t      assessee\tunder  the head ‘Income\t from  other
\n\t      sources’\tin  respect of income,\tprofits\t and
\n\t      gains  of every kind which may be included  in
\n\t      his total income if not included under any  of
\n\t      the preceding heads.\n<\/p>\n
\t      x\t    x\t  x\t x\t     x
\n\t      (3)  Where an assessee lets on hire  machinery
\n\t      plant or furniture belonging to him, he  shall
\n\t      be  entitled to allowances in accordance\twith
\n\t      the provisions of clauses (iv), (v), (vi)\t and\n<\/p>\n
\t      (vii) of sub-section (2) of section 10.\n<\/p>\n
\t      (4)   Where an assessee lets on hire machinery
\n\t      plant  or furniture belonging to him and\talso
\n\t      buildings, and the letting of the buildings is
\n\t      inseparable  from\t the  letting  of  the\tsaid
\n\t      machinery,  plant\t or furniture, he  shall  be
\n\t      entitled to allowances in accordance with\t the
\n\t      provisions of the clauses (iv), (v), (vi)\t and\n<\/p>\n
\t      (vii)  of\t sub-section (2) of  section  10  in
\n\t      respect of such buildings.\n<\/p>\n
To clear the ground it may be stated here that once s. 10 is
\nfound inapplicable to the case, there is no dispute that the
\nincome\tfrom  the  hire of the furniture  and  fixtures\t was
\nrightly\t assessed  under  s.  12  after\t providing  for\t the
\nallowances  mentioned  in sub-s. (3) of that  section.\t The
\nonly  dispute that then remains is whether, the building  is
\nto be assessed under s. 9 which of course will have to be on
\nthe  basis of its annual value or whether the rent from\t the
\nbuilding has to be assessed under s. 12 after the allowances
\nmentioned in sub-s. (4) have been deducted.
\n We have earlier said that s. 12 can only apply if no  other
\nsection is applicable, because it deals
\n817<\/span>
\nwith the residuary head of income.  Now sub-s. (4) of s.  12
\nonly deals with certain allowances and it obviously proceeds
\non  the basis that the income mentioned in it, namely,\tthat
\nfrom   the  buildings  when  inseparably  let  with   plant,
\nmachinery  or furniture is not income falling under  any  of
\nthe  specific  heads  dealt  with by ss. 7  to\t11  and\t is,
\ntherefore, income falling under the residuary head contained
\nin  s.\t12.   There a  preliminary  difficulty\tarises.\t  In
\nrespect of buildings-and with them alone sub-s. (4) of s. 12
\nis  concerned-as  already seen, the owner is liable  to\t tax
\nunder s. 9 not on the actual income received from it but  on
\nits  annual value and in fact quite irrespective of  whether
\nhe has let it out or not.  How then can it be said that\t the
\nrent received from a building could at all come under s. 12?
\nIn  other  words, why can it not be said that  the  specific
\nsection, that is, s. 9, covers the case and the income\tfrom
\nthe building cannot be assessed under s. 12 and no  question
\nof  giving  any allowances under s. 12 (4) arises?   It\t has
\nsometimes  been suggested as a solution for this  difficulty
\nthat  sub-s. (4) of s. 12 applies only when the building  is
\nlet out by a person who is not the owner because such a case
\nwould not come under s.\t 9.   Counsel  for   neither   party
\nhowever was prepared to accept that suggestion.\t Indeed that
\nsuggestion  has its own difficulty.  Under sub-s. (4) of  s.
\n12  the assessee becomes entitled among others to an  allow-
\nance in accordance with s. 10(2)(vi) which is on account  of
\ndepreciation  of  the building “being the  property  of\t the
\nassessee”  from\t which it follows that sub-s. (4) of  s.  12
\ncontemplates the letting of the building by the owner.\tSub-
\nsection\t (4)  of s. 12 must, therefore, be  applicable\twhen
\nmachinery, plant or furniture are inseparably let along with
\nthe  building  by the owner.  If sub-s. (4) of s. 12  is  to
\nhave  any  effect-and  it is the duty of  the  court  so  to
\nconstrue every part of a statute that it has effect-it\tmust
\nbe  held  that\tthe income arising from\t the  letting  of  a
\nbuilding  in the circumstances mentioned in it is an  income
\ncoming\twithin\tthe residuary head.  If a person  cannot  be
\nassessed under s. 12 in respect of the rent
\n1\/SCI\/64-52
\n818<\/span>
\nof  a  building\t owned\tby  him,  sub-s.  (4)  will   become
\nredundant;  there  will be no case in which  the  allowances
\nmentioned  by  it  can be granted in  computing\t the  actual
\nincome from a building.\t An interpretation producing such  a
\nresult is not natural.\tWe :must, therefore, hold that\twhen
\na building and plant, machinery or furniture are inseparably
\nlet  the  Act contemplates the rent from the building  as  a
\nresiduary head of income.\n<\/p>\n
The  next question is, does the present letting come  within
\nthe  term of sub-s. (4) of s. 12 ? That\t provision  requires
\ntwo conditions, namely, that the furniture should be let and
\nalso  buildings and the letting of the buildings  should  be
\ninseparable  from  the letting of the furniture.   Now\there
\nboth  furniture\t and building have no doubt been  let.\t The
\nquestion is, are they inseparably let?\tThe High Court\tdoes
\nnot appear to have answered this question for it was of\t the
\nview  that not only must the two be inseparably let out\t but
\nalso  that  “the primary letting must be of  the  machinery,
\nplant  or furniture and that together with such\t letting  or
\nalong  with such letting, there is a letting of\t buildings”.
\nThe High Court held that the primary letting in the  present
\ncase  was  of  the building  and,  therefore,  deprived\t the
\nappellant  of the benefit of s. 12 (4).\t We may\t state\there
\nthat  the  Tribunal had thought that by requiring  that\t the
\nletting of one should be inseparable from the letting of the
\nother, the section really meant that the primary letting was
\nof  the machinery and the letting of the building  was\tonly
\nincidental  to the letting of the machinery.  It  also\theld
\nthat  in  the present case the primary letting\twas  of\t the
\nbuilding.\n<\/p>\n
Now the difficulty that we feel in accepting the view  which
\nappealed to the High Court and the Tribunal is that we\tfind
\nnothing\t in the language of sub-s. (4) of s. 12\t to  support
\nit.  No doubt the sub-section first mentions the letting  of
\nthe  machinery,\t plant or furniture and then refers  to\t the
\nletting of the building land further uses the word ‘also’ in
\nconnection with
\n819<\/span>
\nthe  letting of the building.  We, however, think that\tthis
\nis  too\t slender a foundation for the  conclusion  that\t the
\nintention  was\tthat  the primary letting  must\t be  of\t the
\nmachinery,  plant or furnitures.  In the absence of  a\tmuch
\nstronger  indication  in  the language\tused,  there  is  no
\nwarrant\t for saying that the sub-section  contemplated\tthat
\nthe  letting  of the building had to be\t incidental  to\t the
\nletting\t of  the  plant,  machinery  or\t furniture.   It  is
\npertinent to ask that if the intention was that the  letting
\nof the plant, machinery or furniture should be primary,\t why
\ndid  not  the  section\tsay so?\t  Furthermore,\twe  find  it
\npractically  impossible\t to  imagine how the  letting  of  a
\nbuilding  could be incidental to the letting  of  furniture,
\nthough we can see that the letting of a factory building may
\nbe incidental to the letting of the machinery or plant in it
\nfor  the object there may be really to work  the  machinery.
\nIf  we are right in our view, as we think we are,  that\t the
\nletting of a building can never be incidental to the letting
\nof  furniture contained in it, then it must be held that  no
\nconsideration  of  primary or secondary lettings  arises  in
\nconstruing the section for what must apply when furniture is
\nlet  and  also buildings must equally apply when  plant\t and
\nmachinery  are\tlet and also buildings.\t We think  all\tthat
\nsub-s.\t(4)  of s. 12 contemplates is that  the\t letting  of
\nmachinery, plant or furniture should be inseparable from the
\nletting of the buildings.\n<\/p>\n
What,  then,  is inseparable letting?  It was  suggested  on
\nbehalf\tof the respondent Commissioner that the\t sub-section
\ncontemplates a case where the machinery, plant or  furniture
\nare  by their nature inseparable from a building so that  if
\nthe machinery, plant or furniture are let, the building\t has
\nalso  necessarily  to be let along with it.  There  are\t two
\nobjections  to this argument.  In the first place,  if\tthis
\nwas the intention, the section might well have provided that
\nwhere  machinery, plant or furniture are inseparable from  a
\nbuilding and both are let etc. etc.  The language however is
\nnot that the two must be
\n820<\/span>
\ninseparably  connected when let but that the letting of\t one
\nis  to\tbe inseparable from the letting of the\tother.\t The
\nnext  objection\t is that there can be no case in  which\t one
\ncannot\tbe separated from the other.  In every case that  we
\ncan  conceive  of,  it\tmay be\tpossible  to  dismantle\t the
\nmachinery  or plant or fixtures from where it was  implanted
\nor  fixed  and\tset it up in a\tnew  building.\t As  regards
\nfurniture,  of course, they simply rest on the floor of\t the
\nbuilding  it,. which it lies and the two indeed\t are  always
\nseparable.  are unable, therefore, to accept the  contention
\nthat  inseparable in the sub-section means that\t the  plant,
\nmachinery or furniture are affixed to a building.
\nIt seems to us that the inseparability referred to in sub-s.
\n(4)  is an inseparability arising from the intention of\t the
\nparties.   That intention may be ascertained by framing\t the
\nfollowing  questions:  Was it the intention  in\t making\t the
\nlease-and it matters not whether there is one lease or\ttwo,
\nthat is, separate leases in respect of the furniture and the
\nbuilding-that  the two should be enjoyed together?   Was  it
\nthe intention to make the letting of the two practically one
\nletting?   Would  one  have been let alone  a  lease  of  it
\naccepted without the other?  If the answers to the first two
\nquestions  are\tin  the affirmative, and  the  last  in\t the
\nnegative  then, in our view, it has to be held that  it\t was
\nintended that the lettings would be inseparable.  This\tview
\nalso  provides\ta justification for taking the case  of\t the
\nincome from the lease of a building out of s. 9 and  putting
\nit under s. 12 as a residuary head of income It then becomes
\na  new kind of income, not covered by s. 9, that is,  income
\nnot  from the ownership of the building alone but an  income
\nwhich  though arising from a building would not have  arisen
\nif the plant, machinery and furniture had not also been\t let
\nalong with it.\n<\/p>\n
That  takes  us\t to the question, was  the  letting  in\t the
\npresent case of the building and the furniture and  fixtures
\ninseparable in the sense contemplated in the sub-section  as
\nwe have found that sense to be ?\n<\/p>\n
821<\/span><\/p>\n
It  is true that the rent for the building and the hire\t for
\nthe furniture were separately reserved in the lease but that
\ndoes not, in our view, make the two lettings separable.\t  We
\nmay point out that the Tribunal has taken the same view\t and
\nthe  High Court has not dissented from it.  In spite of\t the
\nsums  payable  for the enjoyment of two things\tbeing  fixed
\nseparately,  the intention may still be that the, two  shall
\nbe enjoyed together.  We will now refer to the provisions in
\nthe  lease  to\tsee whether the parties\t intended  that\t the
\nfurniture,  fixtures and the building shall all\t be  enjoyed
\ntogether.   Clause  1  of  the\tlessee’s  covenant,  in\t our
\nopinion, puts the matter beyond doubt and it is as follows:-\n<\/p>\n
\t      1.    (a) To use the demised premises and\t the
\n\t      said furniture and fixtures for the purpose of
\n\t      running  hotel,  boarding and  lodging  house,
\n\t      restaurant,   confectionary  and\tsuch   other
\n\t      ancillary\t  businesses  as  are\tusually\t  or
\n\t      otherwise can be conveniently carried on\twith
\n\t      the said business in the said premises such as
\n\t      providing\t show-cases show windows,  newspaper
\n\t      stall,  dancing and other exhibition of  arts,
\n\t      meeting  rooms  etc., and not  for  any  other
\n\t      purpose  without\tthe previous  permission  in
\n\t      writing of the Lessors.\n<\/p><\/blockquote>\n
It  is\tclear  from this clause that the  building  and\t the
\nfixtures  and  furniture were to be used  for  one  purpose,
\nnamely,\t for  the purpose of running a hotel with  them\t all
\ntogether.  Again cl. 1(h) of the lessee’s covenant  provided
\nthat  the lessee is not to remove any article or thing\tfrom
\nthe premises except for the purposes of and in the course of
\nthe  hotel  business  which latter would  be  for  effecting
\nrepairs to them or for replacing them where it was the\tduty
\nof  the\t lessee\t to  do\t so  under  the\t lease.\t  We  think,
\ntherefore,  that the lease clearly establishes that  it\t was
\nthe  intention of the parties to it that the  furniture\t and
\nfixture and the building should be enjoyed all together\t and
\nnot one separately from the other.\n<\/p>\n
Before\twe  conclude we think we should refer to  two  other
\ncovenants.  First, there is a lessor’s
\n822<\/span>
\ncovenant  No.  11  (b) to renew the  lease  of\tthe  demised
\npremises which term, it may be conceded, means the  building
\nonly,  for  a further term of six years.  This\tclause\tsays
\nnothing\t about\tthe  renewal  of any  lease  in\t respect  of
\nfurniture or fixtures.\tLikewise, cl.  III(2) provides\tthat
\nif  the\t demised premises, that is to say,the  building,  be
\ndestroyed  or damaged by fire it shall be the option of\t the
\nlessee\tto  determine the lease and in any  event  the\trent
\nshall  be  suspended  until  the  premises  shall  again  be
\nrendered fit for occupation and use.  Here also there is  no
\nmention\t of  the furniture.  It was said on  behalf  of\t the
\nrespondent that these two clauses indicate that the building
\nand  the furniture were being treated separately and  there-
\nfore  the  lettings of them were not  inseparable.   We\t are
\nunable to accept this contention.  As regards renewal of the
\nlease\tof   the  building,  there  is\tcl.   (II)d   making
\nsubstantially\ta  similar  provision  in  respect  of\t the
\nfurniture and fixtures. it requires the lessor to provide at
\nall  times  during  the continuance of\tthe  lease  and\t the
\nrenewal thereof, the furniture and fixtures mentioned in the
\nlease.\t Therefore, though the renewal clause in  cl.  11(b)
\ndoes  not mention the lease of furniture or  fixtures  being
\nrenewed,  cl.\tII(d) makes it incumbent on  the  lessor  to
\nsupply\tand  maintain them during the renewed  term  of\t the
\nlease of the building.\tClause II(d) would also cover a case
\nwhere  by fire the furniture was destroyed.  In such a\tcase
\nthe  lessee  could under that clause require the  lessor  to
\nprovide\t  and  if  necessary  to  replace,   the   destroyed
\nfurniture.  To the same effect is cl.  1(e) which says\tthat
\nthe  major repair to or replacement of the furniture,  shall
\nbe  made by the lessor.\t Such repair or replacement may,  of
\ncourse,\t be  necessitated in a case where the  furniture  or
\nfixtures are damaged by fire.  We, therefore, think that the
\nclauses\t in the lease on which the respondent relies do\t not
\nindicate that the letting of the building was separable from
\nthe  letting of the furniture and fixtures.  We\t think\tthat
\nthe lease satisfies all the conditions for the applicability
\nof s. 12(4) and is covered by it.\n<\/p>\n
823<\/span><\/p>\n
In  the result we answer the question framed thus: The\trent
\nfrom  the  building  will be computed  separately  from\t the
\nincome\tfrom the furniture and fixtures and in the  case  of
\nrent from the building the appellant will be entitled to the
\nallowances  mentioned  in sub-sec. (4) of s. 12 and  in\t the
\ncase  of  income from the furniture and fixtures,  to  those
\nmentioned  in sub-s (3), and that no part of the income\t can
\nbe assessed under s. 9 or under s. 10.\tThe judgment of\t the
\nHigh Court is set aside.  The appellant will be entitled  to
\nthe costs here and below.\n<\/p>\n
\t\t\t    Appeal allowed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Sultan Brothers (P) Ltd vs Commissioner Of Income-Tax on 6 December, 1963 Equivalent citations: 1964 AIR 1389, 1964 SCR (5) 807 Author: A Sarkar Bench: Sinha, Bhuvneshwar P.(Cj), Sarkar, A.K., Hidayatullah, M., Gupta, K.C. Das, Ayyangar, N. Rajagopala PETITIONER: SULTAN BROTHERS (P) LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX DATE OF JUDGMENT: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-25407","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSultan Brothers (P) Ltd vs Commissioner Of Income-Tax on 6 December, 1963 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/sultan-brothers-p-ltd-vs-commissioner-of-income-tax-on-6-december-1963\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sultan Brothers (P) Ltd vs Commissioner Of Income-Tax on 6 December, 1963 - 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