Sabyasachi Mukharji, J. - (1.) The petitioner, Russell Properties Pvt. Ltd. acquired premises No. 6, Little Russell Street, Calcutta, comprising an area of about 17 cottahs, together with an incomplete building for commercial purpose as well as for the purpose of having its registered office. The petitioner-company, thereafter, completed the construction of the said building and let it out to various tenants. In or about June, 1964, there was an indenture of lease entered into by and between the petitioner-company and the first tenant of the building, M/s. Siemens Engineering and Manufacturing Co. of India Ltd. Assessments for the assessment years 1965-66 and 1966-67 were completed by the Income-tax Officer on the 29th of March, 1971, and 26th of April, 1971, respectively. The question involved in the said assessments was about the true nature and character of the service and maintenance charges received by the assessee-company from its tenants in the multi-storeyed building at No. 6, Little Russell Street, Calcutta. In the said assessments, the Income-tax Officer included the amounts received on account of service and maintenance charges in the rental income and computed the total income of the assessee on the aforesaid basis. Appeals were preferred against the said orders of the Income-tax Officer for the assessment years 1965-66 and 1966-67. The Appellate Assistant Commissioner in his order for the assessment year 1965-66 dated 25th February, 1972, observed, inter alia, as follows : "At the time of the appeal hearing the appellant took up the plea that income from service charges were taxable under the head 'business'. In this connection the appellant placed reliance on the decision of the Supreme Court in Karnani Properties Ltd. v. Commissioner of Income-tax . In that case their Lordships of the Supreme Court held that if the services rendered by an assessee to its tenants were the result of its activities carried on continuously in an organised manner for a set purpose and with a view to earning profits, those activities were business activities and the income arising therefrom was assessable to tax under the head 'business'. It was argued before me that the services rendered by the appellant were analogous to the service rendered by M/s. Karnani Properties Ltd. to its tenants. It was submitted that the appellant had installed an electric transformer for the regulation of supply of electricity to its tenants. It had also erected lift and employed liftman and it was also supervising, scavenging and other works which was very necessary to keep that premises healthy and clean. In the circumstances, the appellant's income from service charges was liable to be assessed under the head 'income from business.' "
(2.) I have considered the submission of the appellant and in my opinion they carry sufficient force. I find that provision of services in this case is one continuous and organised process and this was done with a view to earning profits. The facts of this case are on all fours similar with the facts in the case of M/s. Karnani Properties Ltd. and, therefore, the ratio of the decision in that case is equally applicable in the case of the appellant. The income under the head "services and maintenance charges" is, therefore, liable to be assessed under the head "income from business". The property income has to be computed as under: JUDGEMENT_229_ITR109_1977Html1.htm
(3.) There were similar observations in the order dated 2nd March, 1972, passed by the Appellate Assistant Commissioner for the assessment year 1966-67. Appeals against both the said orders were preferred by the revenue to the Income-tax Appellate Tribunal. Both these appeals came up for hearing before the Income-tax Appellate Tribunal and by an order dated 15th September, 1973, were disposed of by the Tribunal, The Tribunal observed, inter alia, as follows : "(a) We have already given the factual background of the issues involved in this case and have described the various services rendered by the assessee to the tenants. They are practically the same as rendered by M/s. Karnam Properties Ltd., with one minor difference. (b) Considering the elaborate services undertaken by the assessee in the form of watch and ward and scavenging facilities, maintenance of underground drainage for the benefit of the tenants, maintenance of electric installations and electric pumps, constant supply of filtered and unfiltered water, conversion of electricity from high voltage to low voltage and to supply to the tenants, etc., we have no doubt in mind that the Appellate Assistant Commissioner of Income-tax was right in his decision that he took. (c) The services rendered by the assessee had to be viewed against time and expense and energy involved expended in these services. They really partake of the nature of an organised business activity conducted in a systematic manner. (d) In the words of the Bombay High Court decision in the case of National Storage Pvt. Ltd. [1963] 48 ITR 577 (Bom) as approved by the Hon'ble Supreme Court (See the services rendered by the assessee are complex and not merely incidental to the ownership of the property.";