KARNANI PROPERTIES LTD. versus COMMISSIONER QF INCOME TAX, WEST BENGAL

Citation: [1972] 1 S.C.R. 457 · Decided: 27-08-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
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G 
H 
KARNANI PROPERTIES LTD. 
v. 
COMMISSIONER QF INCOME TAX, WEST BENGAL 
August 27, 1971 
[K. S. HEGDE AND A. N. GROVER, JJ.] 
Income Tax Act, 1922, ss. 9, 10, 12, 66-Company owning /lats and 
shops and letting th•m out on rent-A/so supplying electricity, water and 
other <ervices to tenants-Income from latter source whether falls under 
r. 10, or s. 12 of Act-High ,Court in reference cannot go behind the facts 
io11nd by the Tribunal as mentioned in rtatement of case. 
The assessee company owned houses and fiats in Calcutta which it had. 
Jet out on rent. The company purchased from the Calcutta Electric Supply 
Corporation high voltage A. C. current in bulk, converted it into 
low 
voltage A.C. current in the company's own power house with the premises. 
and supplied the power to the tenants.. It also maintained a separate 
water pump-house and a boiler for the supply of hot and cold water to the 
tenants. It further provided for the benefit of tenants electric lifts work-
ing day ancl night. For all these purposes a large permanent staff was 
maintatned. The monthly payments by the tenants consisted apart from 
rent, of charges _in respect ot these services. 
In proceedings before the 
Income-tax Officer for the assessment years 
1956-57 and 
1957-58 the 
assess~e company claimed that the entire receipts from the tenants should 
be treated as income fron1 bGsiness in as much as the company had been 
formed for carrying on the business of letting out flats and shops. The 
Income-tax Officer split the receipts into two parts; one part of the receipts 
he treated as rent received by the assessce and the remaining part he 
treated as income fro1n other sources taxable under s. 12 of the 
Income~ 
rax Act, 1922. 
The Appellate Tribunal accepted the contention of the 
assessee that the income taxed by the Income-tax Officer as income from 
other sources should be treated as income from business. 
Thereafter at 
the instance of the Department the Tribunal referred to the High Court 
the question whether "on the facts and 
circumstances of the case" 
the 
Tribunal was justified in holding that the services supplied to the tenants 
constituted a business activity of the assessee taxable under s. 10. 
The 
High Court opined after a reappraisal of the evidence that some of the 
facts found by the Tribunal were not correct. It came to the conclusion 
that the income.in question was taxable neither under s., 12 nor under s. JO 
but un.der s. 9 though this was not the contention of the Department at 
any stage, 
By certificate appeals were filed in this Court. 
HELD : (1) The jurisdiction of the High Court in dealing with a re-
ference under s. 66 is a verv limited one. It must take the facts as stated 
in the stamement of the case unless the question whether the findings of 
the Tribunal are vitiated for one or the other of the reasons recognised by 
the Jaw is before it. The High Court thought that the Income-tax Officer, 
the Appellate Assistant Commissioner as well as the Tribunal erred in 
holding that the income of the assessee company came from two different 
sources but that question was foreign to the proceedings before the High 
Court. Neither the High Court nor this C~urt has jurisdiction to go behind 
or to question the facts found by the Tnbunal. [461 A-CJ 
Kshetra Mohan Sannyasi Charan Sudhukhan v. Commissioner of Excess 
Profits Tax, West Bengal, 24. I. T. R. 488, relied on. 
458 
SUPREME COURT REPORTS 
[1972] l S.C.R. 
(ii) On the facts found by the Tribunal in the present case it was clear 
that the assessee had two different sources of income and not one source 
as found by the High Court.. [C-D] 
[This however, should nGt be understoocl to mean that in assessing the 
profits and gains from the several activities ; of a business, the profits and 
gains arising from the several activities of that business can be separately 
computed or separately brought to tax.] [463 B-C] 
The services rendered by the assessee !<1 its tenants were the result of 
its activities carried on continuously, in an organised manner and with a 
\iew to earn profits. 
Hence, those activities had to be considered as busi-
ness activities taxable under s. JO of the Act, [461 DJ 
Salisbury House Estate Ltd. v. Fry, 15 Tax Cases 266, applied. 
Commissioner of lnco1ne-tax, Bonibay City v. National Storage 
Pri-
vate Ltd., 66 I. T. R. 596 and Sultan Brothers Pvt, Ltd. v. Commissioner 
of Iricome-tax, Bombay City-/1, 51 I.T

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