V.K. Mehrotra, J. - (1.) THE following questions have been referred by the Income-tax Appellate Tribunal, Allahabad Bench (hereinafter "the Tribunal") under Section 256 of the I.T. Act, 1961 (for brief "the Act"), for the opinion of this court : "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the income of the assessee was liable to be assessed as income from other sources ? (ii) If the answer to question No. (i) is in the negative, was this income from property, as claimed by the Department, or business income, as claimed by the assessee ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in rejecting the assessee's claim that this income was exempt from tax on the principle of mutuality ? "
(2.) THE facts : THE assessee, "Cawnpore Club Ltd.", is a company and runs a club at Kanpur for the benefit of its members. Out of 15 rooms in its annexe, 13 rooms were let out to members of the club on payment of Rs. 250 per month per room and during the previous year pertaining to the assessment year 1971-72, the total rent collected by the assessee from these rooms amounted Rs. 36,547. THE remaining two rooms were occupied by the manager of the club free of rent. THE claim of the assessee, in respect of the aforesaid collection, was that these were business receipts and that the income earned was exempt from tax on the principle of mutuality. THE Tribunal took the view that the income of the club from the letting out of the rooms was assessable as "income from other sources". It rejected the claim of the assessee that the income was exempt from tax on the principle of mutuality. THE Tribunal, however, referred the aforesaid questions for the opinion of this court when approached both by the assessee as well as the Revenue. The contentions : Sri Markandeya Katju, for the Revenue, has contended that the income of the assessee was attributable to and assessable as "Income from house property" under Section 22 of the Act and could not be treated to be income from other sources, for it was not covered by the provisions contained in Section 56(2)(iii) of the Act. Also, that the principle of mutuality was not attracted in such a case. The income could not be treated to be one from business, for, admittedly, the club was not carrying on any business. The income of the assessee, says its counsel Sri R.K. Gulati, could not be brought to tax as income from property which had a definite connotation in law. At best, it could be treated to be income from other sources if not from business and that even on the assumption that it was income from other sources the assessee was not liable to any tax on this income for the principle of mutuality was clearly attracted in the case. The Tribunal was in error in taking a different view. The relevant provisions of the Act : "14. Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, he classified under the following heads of income :-- A.--Salaries. B.--Interest on securities. C.--Income from house property. D.--Profits and gains of business or profession. E.--Capital gains. F.--Income from other sources." "22. The annual value of property consisting of any buildings or lands appartenant, thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'." "56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head 'Income from other sources', if it is not chargeable to income-tax under any of the heads specified in Section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of Sub-section (1), the following incomes shall be chargeable to income-tax under the head 'Income from other sources', namely :-- (i) dividends ; (ia) income referred to in Sub-clause (viii) of Clause (24) of Section 2 ; (ib) income referred to in Sub-clause (ix) of Clause (24) of Section 2 ; (ii) income from machinery, plant or furniture belonging to the assesses and let on hire, if the income is not chargeable to income-tax under the head ' Profits and gains of business or profession'; (iii) 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, the income from such letting, if it is not chargeable to income-tax under the head ' Profits and gains of business or profession '."
(3.) THE scheme is clear. Any income which does not answer the description of an income under the heads contemplated by Section 14 is chargeable to tax under the head "Income from other sources". That is clear from Section 56(1). Sub-section (2) of Section 56 specifies some sources of which income has to be taxed under the head "Income from other sources " and not otherwise. Clause (iii) is one such instance. Sub-section (2) of Section 56 does not derogate from the generality of the provisions of Sub-section (1). The legal position and the precedents thereabout: Income from house property postulates that what has essentially been let out is house property though some conveniences like fixtures, etc., may have incidentally been let out with it for proper enjoyment of the demised premises. If, however, the letting could not have taken place but for the fixtures, furnitures, etc., in the sense that the tenant or licensee would not have taken the premises but for them and the extent of income attributable to such fixtures or furnitures cannot conveniently be predicated, it would be income chargeable to tax under the residuary head of "Income from other sources". In each case, it is the question of intention of the contracting parties discernible with reference to facts objectively noticed.;