Judgment

HEGDE, J.:- These appeals by certificate arise from the decision of the High Court of Calcutta in Income Tax Reference No. 20 of 1963 on its file. That was a Reference under Section 66 (1) of the Income-tax Act, 1922 (to be hereinafter referred to as the Act ), made by the Income-tax Appellate Tribunal B Bench, Calcutta. The question referred to the High Court for its opinion reads thus:

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the services rendered to the tenants by supplying electrical energy, hot and cold water and maintenance of lifts and other amenities, constituted a business activity of the assessee and as such the income arising therefrom was assessable under Section 10 of the Income-tax Act, 1922".

2. The High Court came to the conclusion that the income in question is income from property and as such is assessable under Section 9 of the Act; that being so, the same cannot be assessed under Section 10. In the result it answered the question in the negative and in favour of the Department.

3. The assessment years with which we are concerned in these appeals are 1956-57 and 1957-58, the corresponding accounting periods being the calendar years 1955 and 1956.

4. The facts as set out in the statement of the case submitted by the Tribunal are as follows:

5. The assessee company owned house properties, popularly known as Karnani Mansion in Park Street, Calcutta. The said Karnani Mansion consists of numerous residential flats and over a dozen shop premises. All those were let out to different tenants on a monthly rental basis. The tenants in respect of each of the flats and shops let out had to make a monthly payment which included charges for electric current for use of lifts, for the supply of hot and cold water for the arrangement for scavenging for providing watch and ward facilities as well as other amenities. The Tribunal further found that the assessee company purchases from the Calcutta Electric Supply Corporation high voltage A. C. current in bulk, converts the same into low voltage A. C. current in the Company s own power house within the premises and supplies the power to its tenants. It also maintains a separate water pump-house and a boiler for the supply of hot and cold water to the tenants. The company further provided for the benefit of tenants. Electric lifts working day and night. The further finding of the Tribunal was that for all these purposes the assessee company maintains a large number of permanent staff. No question under Section 66 (1) or S.66 (2) was sought challenging the correctness of the findings referred to earlier. The question submitted to the High Court proceeded on the basis that the facts found by the Tribunal are correct.

6. The total collection from the tenants made by the assessee in accordance with the terms of the agreement between the tenants and the assessee was Rs.5,53,541/- during the accounting year 1956 and Rs.5,59,145/- during the accounting year 1957. The assessee company claimed before the Income-tax Officer that the entire receipts should be treated as income from business inasmuch as the company had been formed for carrying on the business of letting out flats and shops. The Income-tax Officer while rejecting the assessee s contention, split the receipts into two parts, one part of the receipt the treated as the rent received by the assessee and the remaining part he treated as income from other sources taxable under S.12. The total amount of the latter category as allocated by the Income-tax Officer was Rs.1,32,456/- in the assessment year 1956-57 and Rs.1,32,568/- in the assessment year 1957-58. It may be noted that even according to the Income-tax Officer the entire receipt was not assessable under Section 9.

7. In the appeal before the Appellate Assistant Commissioner the only controversy was whether the receipt held by the Income-tax Officer as income from other sources should have been held to be inc