DESAI, J. - (1.) THE Income -tax Appellate Tribunal (Delhi Bench) has referred to this Court for its opinion the following questions under section 66(1) of the Income -tax Act: "(1) Whether the rent realised by the assessee from its members was income from property liable to be assessed under S. 9 of the Indian Income -tax Act? If not (2) Whether the principle of mutuality entitling an assessee to exemption from Income -tax on his receipts would apply only to receipts assessable under Section 10 under the head profits and gains of business, profession or vocation or would apply also to receipts assessable under the head income from property under Section 9 of the Indian Income -tax Act?"
(2.) IT appears from the statement of the case submitted by the Tribunal that the assessee is a limited company running a club exclusively for the use of its members. Among the amenities provided by it to its members is the use of residential quarters owned by it, by members on payment of rent. All members have to pay subscription and such of them as occupy the quarters have to pay the rent in addition. In the previous year relevant to the assessment year 1955 -56 the assessee received Rs. 10,062/ - from the rent of the quarters. The income -tax authorities had been treating the income derived by the assessee from the hiring out of the quarters to its members as income from property assessable to income -tax under Sec. 9 of the Act in the past and in the assessment year 1955 -56 also the Income -tax Officer treating Rs. 10,062/ - as income from property assessed it, after making certain deductions, to income -tax under section 9. This time the assessee filed an appeal from the assessment order contending that the income was not assessable on account of the principle of mutuality. It was contended that the members were the contributors (by paying the rent for the quarters occupied by them) and that the members were the participants (by receiving the rent) and that because there was an identity between the participants and the contributors there was no question of assessing tax. The argument was that no tax can be assessed on what one realizes from ones own self. The Appellate Assistant Commissioner dismissed the appeal, rejecting the assessees claim that on account of the principle of mutuality it was not liable to pay any tax on the income from the rent. The assessee went up in further appeal to the Tribunal, which by a short judgment set aside the assessment order. The assessee was assessed on the income as income from property under Section 9 and not on income from business under section 10. The Tribunal did not set aside the orders of the Income -tax Officer and the Appellate Assistant Commissioner that the income came under the head of income from property and did not hold that it was really income from business assessable under Section 10; still it held that the principle of mutuality applied because in its opinion there was an identity between the contributors and the participants. It observed that a person cannot be said to trade with himself, that the rent received by the assessee from the members was for the benefit of the members and that the quarters were not let out to the members with a view to make any commercial profit and held that the income was not taxable and allowed the appeal. Then at the instance of the Commissioner of Income -tax it referred the above mentioned questions for this Courts opinion.
(3.) WE start first with the important fact that the income that has been assessed in the hands of the assessee is income from property and not income from business. It is settled that the various heads of income mentioned in Sec. 6 of the Act are mutually exclusive (see United Commercial Bank ltd. v. Commr. of Income -tax, 1957 -32 ITR 688 : ((S) AIR 1957 SC 918) and that if an income conies under one head it cannot come under any other head. If the income in dispute is income from property it cannot be income also from business. It cannot be doubted that the income in this case is income from property. The assessee owns the quarters which it hires to its members and derives the income in the form of rent from them. Every person who owns a house or a building is liable to pay income -tax on the annual letting value of it whether he occupies it himself or lets it out to a tenant or lets it remain unoccupied. His liability to pay income -tax arises from the mere fact of his owning the property having an annual letting value and not front his actually deriving any income from it. Even if he does not derive any income from it, as for example when he occupies it himself or lets it remain vacant, he is liable to pay tax. Even when he derives income, as for example when he lets it out on rent, he is liable to pay tax not on the actual amount of the rent but on the annual letting value. The annual letting value of a house may in many cases be the same as the actual rent realised from it but it can also be different. The assessee owns the quarters and is liable to pay income -tax under Section 9 on their annual letting value. The question what is their annual letting value has not been raised before us or before the Tribunal. It is not disputed that the income on which the assessee was assessed by the Income -tax Officer and the Appellate Assistant Commissioner represents the annual letting value of the quarters.;