IMPORTANT POINT
In a reference under Section 256(1) of Income-tax Act, 1961 no new facts can be introduced by the High Court.

JUDGMENT

B.P. Jeevan Reddy, J.-Leave granted. Heard the counsel for both the parties.

2. The Commissioner of Income Tax, Calcutta has preferred this appeal against the Judgment of the Clacutta High Court in Income Tax Reference No. 88/1986, answering the question referred at the instance of the assessee, in favour of the assessee. The question referred under Section 256(1) of the Income Tax Act is "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the income as received by M/s. Surrendra Overseas Limited, be assessed as the income of the assessee from business from leasehold interest?"

3. Under a deed of assignment, dated 3rd September, 1966, the assessee obtained the leasehold interest, for the unexpired period of lease, in respect of premises No.3, 5, 7, 9, 11, 13 & 15, Park Street, Calcutta, from Credit Transactors. In the accounting year relevant to the Assessment Year 1971-72, the assessee executed a sub-lease in respect of a portion of its leasehold interest in favour of M/s. Surrendra Overseas Limited, another limited company "associated with the assessee". The deed of sub-lease was, however, not registered though it is said that M/s. Surrendra Overseas Limited, paid a premium of Rs. 63,13,000/- and was also paying a rent of Rs. 15,000/- p.a. in consideration of the said sub-lease. M/s. Surrendra Overseas Limited, was receiving the rental income from the property subleased to it. The income so received by M/s. Surrendra Overseas Limited was sought to be taxed in its hands as `income from house property , to which Surrendra Overseas objected. The matter was carried to the Tribunal, which held in I.T.A. No. 519(Cal.)/1976-77, that since M/s. Surrendra Overseas Limited, is not the owner of the said house property, the income from that house property cannot be taxed in its hands. An application for making a reference under Section 256(1) of the Act filed by Revenue was rejected by the Tribunal.

For the assessment years in question i.e., 1975-76 to 1979-80, the Income Tax Officer sought to include the rental income received by M/s. Surrendra Overseas in the assessment of the assessee. The assessee objected to the same contending that inasmuch as it has trasferred a portion of its leasehold interest in favour of M/s. Surrendra Overseas, the income received from the properties so transferred to M/s. Surrendra Overseas Limited cannot be included in its total income. The Income Tax Officer rejected the objection relying upon Sri Ganesh Properties Ltd. v. Commissioner of Income-Tax West Bengal1, Sakarchand Chhaganlal v. Controller of Estate Duty, Gujarat2 and Bengal Jute Mills Co. Ltd., Calcutta v. Commissioner of Income-Tax, Central, Calcutta3.

4.The assessee appealed to the Commissioner of Income Tax (Appeals) who recorded a finding that "the income from the leasehold property should be assessed under the head `business . He did not give any specific direction with respect to the quantum of income. Pursuant to the appellate order, the Income Tax Officer passed an order under Section 251 of the Act giving effect to the appellate order. He assessed the income from leasehold property as income from business.

Against the order of the Commissioner of Income Tax(Appeals) aforesaid (dated 5.10.1982) the Revenue filed an appeal before the Tribunal contending that the Commissioner (Appeals) was not justified in directing the income from leasehold property to be assessed as income from business. According to Revenue, it was liable to be assessed as income from house property. The Tribunal dismissed this appeal.

The assessee preferred an appeal against the aforesaid orders of the Income Tax Officer passed under Section 251 of the Act. The Commissioner of Income Tax (Appeals) while affirming his earlier order that the said income should be assessed as income from business, held that the income received by M/s. Surrendra Overseas Limited from the properties sub-leased to it, sho