Oak, C.J. - (1.) THIS is a reference under Section 66 of the Indian Income-tax Act, 1922. Messrs. Rampur Industries Ltd. is the assessee. The assessment year is 1960-61. The assessee is a limited company incorporated in the year 1939. Formerly, its business consisted of running an oil mill and manufacturing soap. The company had its godowns, plant and machinery for those purposes. In the year 1948-49, the oil mill business was stopped. In the year 1951-52, soap manufacturing business was also stopped; but the assessee started rice-milling business. Rice milling business is still continuing. The assessee found that after stoppage of the oil mill and soap business, certain godowns belonging to the assessee had fallen vacant. Those godowns were let out to the U. P. Government and the Central Government for storing grain during the accounting year. The assessee received a sum of Rs. 9,906 towards rent for those godowns. THIS receipt was assessable as income during the assessment year. The assessee urged that receipt of Rs. 9,906 should be treated as income from business. The Income-tax Officer, however, took the view that this was the assessee's income from property. THIS view was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the request of the assessee, the Appellate Tribunal, Delhi Bench "A", has referred the following question of law to this court: "Whether, on the facts and in the circumstances of the case, the rental income of Rs. 9,906 was chargeable to tax under Section 9 or under Section 10(2) of the Income-tax Act, 1922 ?"
(2.) IT is common ground that the receipt in question is taxable as income under the Indian Income-tax Act, 1922 (hereafter referred to as "the Act"). The only point of difference is whether the case is covered by Section 9 of the Act or by Section 10 of the Act. Section 9 deals with property. Sub-section (1) of Section 9 states : "The tax shall be payable by an assessee under the head 'Income from property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax....." Section 10 deals with business. Sub-section (1) of Section 10 states : "The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him." The question is whether the income amounting to Rs. 9,906 fell under Section 9 or under Section 10 of the Act.
(3.) IN Commissioner of Excess Profits Tax v. Srt Lakshmi Silk Mills Ltd., [1951] 20 I.T.R. 451; [1952] S.C.R. 1(S.C.). the assessee-company was a manufacturer of silk cloth and as part of its business it installed a plant for dyeing silk yarn. The plant remained idle for some time. It was, therefore, let out to a person on a monthly rent. The question was whether the sum representing the rent realised by the assessee was chargeable to excess profits tax as profits of business or was income from other sources. It was held that it was income from business. The Supreme Court observed on pages 455 and 456 of its judgment thus : "Owning properties and letting them was not a purpose for which it was formed and that being so, the disputed income cannot be said to fall under any section of the INcome-tax Act other than Section 10." That observation lends some support to the contention of Mr. G. P. Bhargava, appearing for the assessee. In the same case the court, however, observed on page 458 : "The case of and owner of land letting out his land and carrying on exploitation of part of that land by selling gravel out of it ... would fall under Section 9 of the Indian Income-tax Act, as income earned, no matter by whatever method from land, and specifically dealt with by that section." ;