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.....'
3. 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.'
4. The question is whether the income amounting to Rs. 9,906 fell under Section 9 or under Section 10 of the Act.
5. In Commissioner of Excess Profits Tax v. Srt Lakshmi Silk Mills Ltd.,  20 I.T.R. 451;  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.'
6. 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.'
7. It may further be pointed out that the problem in that case arose under the Excess Profits Tax Act. The present case is governed by the Indian Income-tax Act, 1922. Further, in that case the plant was let out. In the present case godowns of the assessee were let out. Letting of a building is slightly on a different footing from letting of a plant.
8. In Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits tax,  26 I.T.R. 765 ;  1 S.C.R. 952(S.C.), it was held that letting out of the plant and machinery by the assessee-firm could not be held to fall within the body of the definition of 'business' under Section 2(5). That too was a case under the Excess Profits Tax Act.
9. In Commissioner of Income-tax v. Calcutta National Bank Ltd.  37 I.T.R. 171;  Supp. 2 S.C.R. 660 (S.C.), it was pointed out by the Supreme Court that the definition of 'business' in Section 2(5) of the Excess Profits Tax Act is wider than the definition of that term under Section 2(4) of the Income-tax Act.
10. In Commissioner of Income-tax v. National Mills Co. Ltd.,  34 I.T.R. 155 (Bom.) , a company was carrying on the business of manufacturing textiles. The liquidator let the plant and machinery of the company at a monthly rent for a period of three years. It was held by the Bombay High Court that there-was material to justify the finding of the Appellate Tribunal that the income derived from the lease of the plant and machinery was income from business. It will be seen that in that case also what was let out was plant and machinery.
11. In G. R. Narasimier & Co. v. Commissioner of Income-tax,  73 I.T.R. 257 (Mad.), the assessee carried on a business of running a powerloom factory by manufacturing handloom cloth in partnership. Under an agreement R was at liberty to shift the looms and accessories to a new premises. It was held that the intention of the parties as expressed in the document being one to create a relationship of principal and agent in relation to the working of the looms, it could not be treated as a lease, and hence the income was assessable as income from business. It will be seen that in that case the agreement was treated as a transaction which did not constitute a lease. In the present case the assessee obviously let out the godowns to the Government under the leases.
12. Commissioner of Income-tax v. National Storage Private Ltd.,  48 I.T.R. 577 (Bom.), the assessee-company was promoted by the aim distributors of Bombay for various objects connected with film business. The assessee owned certain vaults. It permitted the vaults to be used by film distributors on payment of a monthly charge. It was held by the Bombay High Court that the income which the company earned through the licence-holders coutd not be regarded as income from property under Section 9 of the Income-tax Act. The activity of the company in earning that income was a business activity. Letting out a vault may stand on a different footing from letting out an entire building like a godown.
13. In C. P. Pictures Ltd. v. Commissioner of Income-tax,  46 I.T.R. 1181 (Bom.), the assessee was carrying on the business of exhibiting motion pictures in its own cinema theatre. It leased the theatre for the purpose of exhibiting motion pictures to a stranger for five years on a monthly rent of Rs. 2,000. It was held that on a construction of the lease as a whole the income which the assessee received from the lease of the theatre and its equipment was income from business, and had to be assessed under Section 10 of the Act, and not under Section 12. It will be seen that in that case the department suggested that the case fell under Section 12 of the Act. There was, therefore, no occasion for discussing the question whether the transaction was governed by Section 9 of the Act.
14. In Coringa Co. Ltd. v. Commissioner of Income-tax,  62 I.T.R. 523 (A.P.), the assessee-company carried on business in rice-milling and brick manufacturing. It leased out its rice-mill. It was held that the commercial activity of the assessee-company was in two directions, viz., letting out the rice mill and manufacture of bricks. The case was governed by Section 10 of the Act. The main controversy is that case appears to be whether the second proviso to Section 10(2)(vii) applied or not.
15. In Lakshmi Industries (Private) Ltd. v. Commissioner of Income-tax,  41 I.T.R. 645 (Mad.), the assessee-company owned an oil and rice mill. The entire mill was leased during the relevant year at a rent of Rs. 3,000 per month. It was held that the assessee was entitled to carry forward and set off the loss of earlier years against the income of the relevant year.
16. In East India Housing and Land Development Trust Ltd. v. Commissioner of Income-tax,  42 I.T.R. 49 (S.C) the appellant-company was incorporated with the object of buying and developing landed properties and promoting and developing markets. The question arose whether income realised from tenants of shops and stalls was liable to be taxed as business income under Section 10 of the Act or as income from property under Section 9. It was held by the Supreme Court that income derived by the company from shops and stalls was income received from property, and fell under the specific head described in Section 9. Distrinct heads specified in Section 6 of the Income-tax Act indicating the sources are mutually exclusive, and income derived from different sources falling under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate Section. If the income from a source falls within a specific head set out in Section 6, the fact that it may indirectly be covered by another head will not make the.income taxable under the latter head.
17. It will be seen that that is a direct decision on the question whether income from rent in such cases falls under Section 9 or under Section 10 of the Act. From the standpoint of the department, the present case is, stronger than the case of East India Housing and Land Development Trust Ltd. In that case the assessee-company was expressly incorporated with the object of buying and developing landed properties. Yet it was held that receipt from rent amounted to income from property under Section 9 of the Act. In the present case the assessee-company was not established for earning profit from godowns. Godowns were let out incidentally. Rent from godowns is clearly income from property for purposes of Section 9 of the Act. In a sense, that may amount to business under Section 10 of the Act. But, as explained by the Supreme Court, if an item is covered by a specific head, it cannot be covered by a head which touches the item only incidentally. The Tribunal was right in holding that this was income from property ; and item fell under Section 9 of the Act.
18. Our answer to the question referred to the court is that, on the facts and in the circumstances of the case, the rental income of Rs. 9,906 was chargeable to tax under Section 9 of the Indian Income-tax Act, 1922. The answer to the question is against the assessee. The assessee shall pay the Commissioner Income-tax, U. P., Rs. 200 as costs of the reference.