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Tinsukia Development Corporation Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 113 of 1970
Judge
Reported in[1979]120ITR476(Cal)
ActsIncome Tax Act, 1961 - Sections 12, 22 and 256(2); ;Indian Income Tax Act, 1922 - Section 9
AppellantTinsukia Development Corporation Ltd.
RespondentCommissioner of Income-tax
Cases ReferredMoir v. Williams
Excerpt:
- .....or vocation carried on by him the profits of which are assessable to tax......... ' 8. the learned standing counsel appearing on behalf of the assessee has contended that in the instant case unless it is shown that the building inquestion included the land on which the building is standing or alternatively the expression ' buildings or lands ' is read conjunctively as ' buildings and lands ', section 9 cannot apply in the instant case. 9. in the instant case, the assessee is admittedly not the owner of the land but only of the temporary structures built on the land. 10. the learned standing counsel further contended that the structures which had been put up by the assessee could not be held to be ' buildings ' within the meaning of section 9. according to him, a building has been.....
Judgment:

Dipak Kumar Sen, J.

1. At the instance of Tinsukia Development Corporation Ltd., the assessee, the Tribunal has been directed by this court under Section 256(2) of the I.T. Act, 1961, to refer the following questions of law :

' (1) Whether in view of the objects for which the assessee-company was formed and/or the activities of its predecessors-in-title and itself in respect of the Khiraj lease under the Government of Assam the conclusion of the Tribunal that the income from such leasehold properties converted into residential and trading sites, is assessable under the head ' House Property ' is sustainable in law

(2) Whether, on the facts and in the circumstances of the case, and on an interpretation of the various leases and sub-leases and indentures, the entire income from pucca building should have been assessed under Section 9 of the Indian Income-tax Act, 1922, or Section 22 of the new Act

(3) Whether, on the facts and in the circumstances of the case, the temporary structures are buildings within the meaning ,of Section 9 of the Indian Income-tax Act, 1922, and the income therefrom is liable to beassessed as owners of property under Section 9 of the Indian Income-tax Act, 1922, or Section 22 of the new Act '

2. The relevant facts which have been found or admitted as will appear from the statement of the case and annexures thereto may be shortly noted as follows :

The assessment year involved is 1960-61, the relevant accounting year having ended on the 31st March, 1960. The assessee is a limited company. Its objects are contained in its memorandum of association which has been made a part of the statement of the case. Certain lands in the town of Tinsukia had been demised on lease by the Deputy Commissioner of Lakhimpur to one Senairam Doongarmull in 1934. The said leases were in the form known as ' Khiraj Lease ' prevalent in the State of Assam in respect of town lands.

3. It is not disputed that Tinsukia Development Corporation Ltd., the assessee, came to enjoy the rights of Senairam Doongarmull, the lessee, under the said leases. The assessee put up bustees on the land consisting of structures with no foundation but with light plinths or floor and with walls made of planks of unseasoned indigenous wood or corrugated sheets fixed on bamboo frames or indigenous logs of wood with corrugated sheet roof.

4. In the assessment in question it was claimed by the assessee that the income from the said leasehold properties was not assessable under Section 9 of the Indian I.T. Act, 1922, but such income was assessable under Section 12 of that Act. This claim was rejected by the ITO. On appeal, the AAC sustained the rejection of the claims of the assessee by the ITO. The AAC followed an order of the Appellate Tribunal in respect of an earlier assessment of the same assessee for the assessment years 1956-57 to 1959-60.

5. On further appeal to the Appellate Tribunal, the earlier order of the Tribunal was again followed.

6. This order of the Tribunal has resulted in this reference at the instance of the assessee.

7. To appreciate the contentions of the assessee, Section 9 of the Indian I.T. Act, 1922, may be noted. This section reads, as follows :

' 9. Property.--(1) 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......... '

8. The learned standing counsel appearing on behalf of the assessee has contended that in the instant case unless it is shown that the building inquestion included the land on which the building is standing or alternatively the expression ' buildings or lands ' is read conjunctively as ' buildings and lands ', Section 9 cannot apply in the instant case.

9. In the instant case, the assessee is admittedly not the owner of the land but only of the temporary structures built on the land.

10. The learned standing counsel further contended that the structures which had been put up by the assessee could not be held to be ' buildings ' within the meaning of Section 9. According to him, a building has been well defined in law. What is a building must always be a question of degree and circumstances. He relied on the above meaning of the word ' building ' given in Stroud's Judicial Dictionary, fourth edn. Stroud quotes the observation from the decision of Esher M. R. in the case of Moir v. Williams [1892] 1 Q.B. 264. On a point of fact it was emphasised by the learned standing counsel that the structures put up by the assessee had no foundation. They were not in any sense embedded in the land or earth as in the case of ordinary buildings. The walls were also constructed of planks and constructed for temporary use.

11. The learned standing counsel also urged, though faintly, that from the data available in respect of the structures it could not be held that they were meant to be let out from year to year as contemplated in Section 9. The structures were meant to last only for one season as they were not likely to survive the heavy rains in the rainy season.

12. Lastly, the learned standing counsel contended that assuming everything against the assessee, it was apparent from the memorandum of association of the assessee and the nature of the transactions it had, that the assessee was only carrying on its business in letting out the structures to different persons. It was not the case that the assessee was merely enjoying the income from property as an owner. On this ground, he contended that such income should be assessed as business income and not income from house property under Section 9.

13. It does not appear that any of the contentions of the learned standing counsel can be sustained. The point made in respect of separate ownership of the land and the buildings appears to be concluded and/or covered by a decision of this court in the case of Sri Ganesh Properties Ltd, v. CIT : [1962]44ITR606(Cal) . In this case, it was specifically held that though the terms of a lease, being a building lease, provided that the ownership of the structure to be built remained vested in the lessee while the ownership of the site, that is the land, remains in the lessor, the lessee can still be assessed in respect of the income from such structure under Section 9 of the Indian IT. Act, 1922, as an income from property. Such income should not be assessed under Section 12 of the Act. It was further held in this case that a person may be assessed as the owner of a property under Section 9 of the Act even thoughhe did not have the full right of ownership and his right of ownership was subject to contractual or other limitations.

14. We are not also impressed by the contention of the learned standing counsel that the structures put up by the assessee cannot be and are not buildings within the meaning of the said section. A report of the valuer of the assessee, H. Sarkar, is annex. ' F ' to the statement of the case. In this report it is stated, inter alia, as follows :

' From the above description of the said structures it will appear that these structures are temporary structures. I say from my experience of valuing these sorts of huts that their longivity cannot exceed five or six years. Specially in Assam, where rainfall is unduly heavy.'

15. From this report, it is obvious that the structures on these lands can be let out at least for 5 to 6 years once they are put up and it cannot be said that such structures are only seasonal structures which disintegrate in heavy rains and do not survive the annual rainy season.

16. The Tribunal in any event has considered the definition of Lord Esher noted above and has found as a fact that these structures have a longer term of life. The Tribunal has also noted the nature of materials used in the said structures and has further found as a fact that the life of the structures is sufficiently long as to be let out from year to year. These findings of fact have not been challenged as perverse or based on no evidence.

17. The last contention of the learned standing counsel that this income of the assessee is income from its business is equally unsustainable. This case was never made out at any earlier stage and it cannot be said that this question arises from the order of the Tribunal. No evidence was adduced by the assessee at any stage to show what was the precise nature of the business carried on by it and whether its activities in putting up the structures in the said land and letting them out formed part of its regular business. The assessee cannot raise and agitate this point in this reference particularly when the relevant facts relating thereto have not been investigated or found.

18. For the above reasons, the revenue succeeds in this reference. Question No. 1 was not pressed by the learned standing counsel and we do not answer the same. We answer question No. 2 by stating that the incomes from the structures have been rightly assessed under Section 9 of the Act.

19. Question No. 3 we answer by stating that the structures put up bythe assessee are buildings within the meaning of Section 9 of the Indian I.T. Act,1922, and the incomes arising therefrom are liable to be assessed in thehands of the assessee under the said section.

20. In the facts and circumstances, we make no order as to costs.

Deb, J.

21. I agree.


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