LexCOMMISSIONER OF INCOME-TAX, BOMBAY CITY-1, BOMBAY versus NATIONAL STORAGE PVT. LTD., BOMBAY
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A COMMISSIONER Of<' INCOME-1AX, BOMBAY CITY-1, BOMBAY B c D E F G H v. NATIONAL STORAGE PVT. LTD., BOMBAY April 26, 1967 (J. C. SHAH, S. M. SIKRI AND V. RAMASWAM), JJ.J /ndiGn Income-tax Act (11 of 1922), ss. 9 & 10-Assessce's premises hired out--Not an ordinary lease but ,for purposes of its 01t.•n business- Assessment under which head. The assessee-Company was promoted because the Government of India promulgated the Cinematograph Rules, 1948, according to which distri- butars of films were required to store films in godowns constructed in conformity with the specifications laid down in the Rules. The assessee constructed vaults of special design with special doors and electrical fit· tings as required and entered into agreements with several distributors who became vault-holders paying certain amounts for the use of the vaults. The key to each vault was retained by the vault-holder, but the kev to the entrance which permitted access to the vaults was kept in the exCiusive possession of the assessee. The assessee rendered valuable ser- vice to the vault-holders by installing a fire alarm, by opening Railway Booking Offices in the premises and by employing a regular staff, and incurred the necessary expenditure. The vaults were used for the speci- fic purpose of storing films and other activities connected with the exami- nation, cleaning. waxing and rewinding of the films. On the question whether the assessee was to be ass~sed to income- tax under s. 9 or s. 10 of the Income-tax Act, 1922, HELD : The assessee \Vas carrying on business, that is, carrying on an adventure or concern in the nature of trade in the premises, and was 1herefore liable to be assessed under s. 10 and not under s. 9 of the Act. The Act does not contemplate assessment of property under s. 9 in res- pect of the rental income and assessment under s. 10 in respect of the extra incon1e derived from the carrying on of an adventure o't concern in the nature of trade if the assessee is in occupation of the premises for the purpose of the business. The scheme of the Act is that the various heads of income. profits and gains enumerated in s. 6 are mutually ei- clusive, each head being specific to cover the item arisin~ from a parti- cular source, and whether an income falls under one head 'or another has to be decided according to common notions of practical men. In the present case, the agreements ar.e 1icences and not leases, the assessee being in occupation of a1l the premises for purposes of its own concern, namely, the hiring out of specially built vaults and providing services to the vault-holders, who were the licensees. The subject which was hired out was a complex one and the return received by the assessee Was not income derived from the exercise' of property rights, but was derived from c•rry'ng on an adventure or concern in the nature of trade. [81Se; 1'20C-F] ' The Governors of the Rotunda Hospital, Dublin v. Co1nan, ~, T.C. (H.L.) 517, applied. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1048- 1051 of 1966. 814 SUPREME COURT REPORTS [1967] 3 S.C.R. Appeals from the judgment and order dated July 2, 3, 1962 A . of the Bombay High Court in Income-tax Reference No. 45 of 1960. T. V. Viswanatha Iyer, A. N. Kirpal and R. N. Sachthey, for the appellant (in all the appeals). S. T. Desai', F. N. Kaka, S. K. Dho/akia and 0. C. Mathur for B the respondent (in all the appeals). The Judgment of the Court was delivered by Sikri, J. These appeals by certificate granted by the Bombay High Court under s. 66A(2) of the Indian Income-tax Act, 1922 -hereinafter referred to as the Act-are directed against its judgment in Income-tax Reference No. 45 of 1960 by which• it answered the first question of law referred to it by the Income-tax Appellate Tribunal in favour of the National Storage Ltd., Bom- bay, hereinafter referred to as the assessee. The following ques- tions were· referred to the High Court by the Appellate Tribunal at the instance of the Commissioner of Income-tax, Bombay City-I, Bombay : "1. Whether on the facts and circumstances of the ~ase, the vaults were used for the purposes of the business and income arising therefrom is assessable under Section 10 ? 2. If the answer to question I is in the negative, whether the income is assessable under Section . 9 or Section 12 ?" The relevant facts and circumstances are as follows :-The assessee was promoted because
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