P.B.MUKHARJI, ACTG. C.J. -
(1.) THESE are three Income-tax reference which at counsel's request we have heard one after the other because they arise between the same parties and because there are certain connected questions of fact and law, and because they arise out of the same order of the Tribunal although three different references have been made.
(2.) WE shall take up first IT. Ref. No. 102 of 1967, in the matter of CIT vs. Chitpore Golabari Co. (P) Ltd. The question set for an answer by this court in this reference is an follows:
"Whether, on the facts and in the circumstances of the case, on a proper construction of the indenture of lease dated 28th October, 1957, the Tribunal was right in holding that the entire rental income from premises No. 8, Clive Row, Calcutta, should be assessed under s. 12 of the IT Act. 1922 ?"
The facts of the case giving rise to this question are as follows : The assessment year is 1961-62 for which the corresponding accounting year in this case is the calendar year 1960. The assessee is an investment and property holding company managed by Andrew Yule and Co. Ltd. During the accounting year the company owned, inter alia, three properties, namely, No. 8 Clive Row, 243, Upper Chitpore Road and No. 62, Hazra Road, all in the town of Calcutta. By an indenture of lease dated the 28th October, 1957, the assessee-company leased premises No. 8, Clive Row, to a number of companies managed by Andrew Yule and Co. Ltd. The deed records that in consideration of the rent reserved and other covenants and conditions, the landlord demised unto the tenants, 8, Clive Row, together with the compound, garage, outhouses belonging or appurtenant thereto excluding the fixtures and fittings therein at a monthly rent of Rs. 8,612. It was further provided in the said deed that the landlord would let out on hire and the tenants would take on hire the fixtures fittings and the airconditioning plants in the said premises whether affixed or not and specified in the third schedule thereto at a rent of Rs. 5,082 per month for the hire of the said fixtures and fittings and the airconditioning plants. The lease is a part of the record of the case.
In its return the assessee showed the rent reserved for the building under s. 9 and the rent reserved for fixtures, buildings and air, conditioning plant under s. 12. The assessment was made accordingly. Before the AAC on appeal from the order of assessment, the assessee raised no objection to the method of assessment of the income from 8, Clive Row property. On this point the AAC confirmed the order of the ITO.
(3.) THE assessee appealed before the Tribunal. It was claimed on behalf of the assessee that the entire rental income from 8, Clive Row, should have been assessed under s. 12 and the letting value of the fixtures, fittings, airconditioning plant, etc., was inseparable from the letting of the buildings. Reliance was placed on the Supreme Court decision in Sultan Brothers vs. CIT (1964) 51 ITR 353 (SC). THE Tribunal, on a consideration of the terms of the indenture of lease dated the 28th October, 1957, and in view of the fact that the building was situated in the principal commercial centre of Calcutta and was let out to the companies managed by Andrew Yule and Co. Ltd., to be used as their Calcutta offices, held that the lessee would not have accepted the lease of the premises without hire of the fixtures and fittings, such as the lifts, electrical fittings, airconditioners, etc. THE Tribunal applied the test laid down by the Supreme Court in the above- mentioned case and held that it was the intention of the parties to the deed of lease that the letting would be inseparable. THErefore, the Tribunal directed that the entire rental income from premises No. 8, Clive Row, should be assessed under s. 12 after allowing all the deductions available under that section. On these facts, the Tribunal stated the case and raised the above question in this reference under s. 66(1) of the Indian IT Act, 1922. Sec. 12(4) of the IT Act, 1922, reads as follows :
"Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, he shall be entitled to allowances in accordance with the provisions of cls. (iv), v, (vi) and (vii) of sub-s. (2) of s. 10 in respect of such buildings."
THE word "inseparable" is used in the above section. THE Tribunal has found on the facts of this case and on the reading of the lease that in the instant reference the letting of the fixtures, plant and machinery in this case was inseparable from the letting of the building within the meaning of this statutory provision. Sec. 12(4) of the IT Act, 1922, was introduced by the Indian IT (Amendment) Act, 1941 (23 of 1941). Prior to that s. 12(3) of the IT Act, 1922, was introduced by the Indian IT (Amendment) Act, 1939 (7 of 1939), and which reads as follows :
"Where an assessee lets on hire machinery, plant or furniture belonging to him, he shall be entitled to allowances in accordance with the provisions of cls. (iv), (v), (vi) and (vii) of sub-s. (2) of s. 10."
The reason for setting out both sub-ss. (3) and (4) of s. 12 is to show the sequence and the juxtaposition which will have a bearing on the interpretation. Two obvious and major questions arise in this reference. The first is about the inseparability and the meaning to be given to the word "inseparable" in s. 12(4) of the Indian IT Act, 1922. The other is : What is the meaning and connotation of the expression "machinery, plant or furniture" appearing in s. 12(4) of the Act.;