1. In this case the facts found are that the assessee purchased the Sulkea Jute Press in 1907, and worked it until 1930. In 1931 he leased it out for a term of one year to the Sulkea Jute Pressing Company Limited, a private company in which he holds more than 60 per cent of the shares, and that lease is subsisting, the lessee holding over under the terms of the lease. Those terms, inter alia, are: (a) You shall pay us a net annual rent of Rs. 22,500 only payable as follows, i.e., Rs. 2,500 to be paid by 31st August 1931 and the balance by four instalments of Rs. 5,000 each, on 1st November 1931, 1st February, 1st May and 1st August 1932. (b) During the said period of one year, we shall only pay the rents payable to the superior landlords and you shall pay the Municipal taxes, Fire Brigade License and all other outgoings and public charges, (c) You shall carry out all repairs to the engines, machineries and plants, godowns and buildings during the said period at your own expense.
2. The assessee's income from this source was assessed under Section 12 as income from 'other sources.' He claimed to be assessed under Section 10 as upon profits or gains of business, and to be entitled to an allowance for depreciation under Section 10(2)(vi). The assessee had another Jute press which he purchased in 1915 and worked until 1921, when he leased it out until 1930, and subsequently, after a year's vacancy, leased it out again. The Commissioner decided against the assessee's contention and referred the, following question for the decision of this Court:
Whether in the circumstances set forth above, the assessee is entitled to an allowance for depreciation in respect of the buildings, plant and machinery leased to the Jute Pressing Company under Section 10(2)(vi) of the Act?
3. The reasons for his decision are mainly that under Section 10(2)(vi) depreciation is allowable only when the machinery and plant in question are the property of the assessee, and are used for the purpose of the business, the income of which is being taxed, and secondly that the assessee originally worked the jute press himself, and that was his intention at the time of acquisition. I cannot appreciate the cogency of the distinctions, which the Commissioner has sought to draw. The press is the property of the assessee, and is used for the purpose of the business the income of which is being taxed, namely the business of letting out the press. The fact that the assessee originally intended to work the press himself seems to be irrelevant. The decision in Mangalagiri Sri Umamaheswara Gin and Rice Factory Limited v. Commissioner of Income-tax, Madras 1926 Mad 1032 supports the assessee's contention. That the lessor in that case was a registered company seems to me to be irrelevant. It was decided that where a limited company incorporated for the purpose of milling rice, acting in pursuance of authority given in the memorandum of association leased out the buildings, plant, machinery, etc., to another company for a fixed annual rent, the lessors bearing any loss by depreciation and the lessees being liable for repairs, the company was carrying on the business of letting a rice mill and was entitled to an allowance for depreciation under Section 10(2)(vi), Income-tax Act. In Sutherland v. The Commissioner of Inland Revenue (1928) 12 Tax Cas 63, Lord Mackenzie stated that:
It is clear, I think from what has already been read from the judgment of Lord Hardwicke in the case of Doddington v. Hallet (1750) 1 VS 497, and a series of subsequent cases that the letting of a ship to freight is just as much a trade as any other.
4. In 1 V.S. 497(3) Lord Hardwicke had said that:
It must be admitted that the ship may be the subject of partnership as well as anything else; the use and earnings thereof being proper subject of trade; and letting a ship to freight is as much a trade as any other.
5. This statement was approved by Thompson, C.B., in Attorney General v. Borrodaile (1814) 1 Prices' Ex Rep 163. The decision in In re, Commercial Properties Ltd. 1928 Cal 456, that a company owning house property and carrying on only the business of letting such houses, is liable to income-tax under Section 9, Income-tax Act, in the same way as a private individual owning such property is clearly distinguishable, and so is the decision in In re Kaladan Suratee Bazzar Co. Ltd., 1 ITC 50. Such property consisted of buildings, or lands appurtenant thereto, within the meaning of Section 9, which specifically provides for the taxation of income from this kind of property. It has not been suggested by either party that income arising from letting out a jute press comes within the purview of this section, but that it comes under either Section 12 or Section 10. In my opinion the letting of a jute press at a rent is as much a business as the letting of a ship to freight, or the letting of a motor-car or any other kind of machine, or machinery for hire. In Mangalagiri Sri Umamaheswara Gin and Rice Factory Limited v. Commissioner of Income-tax, Madras, 1926 Mad 1032(supra) the learned Judges pointed out that the Crown would not suffer if an allowance were made to the lessors for depreciation under Section 10(2)(vi), because, under the conditions of the lease, the lessors had to bear the loss caused by depreciation. Therefore a similar allowance for depreciation could not be claimed a second time by the lessees, though they could claim an allowance for repairs for which they were liable under the lease.
6. Similarly in the present case the lessees are liable only for repairs and not for depreciation, and in no circumstances could they claim an allowance for depreciation under Section 10(2)(vi) because the buildings, machinery, etc., mentioned in that sub-section must be the property of the assessee. The result is that the question referred to us for decision must be answered in the affirmative. The assessee is entitled to his costs of the reference.
7. I agree.