Income from letting of vaults for storage of films is income from business and not income from property.

Headnote:
INCOME TAX - Section 9 and 10 - Letting of vaults for storage of films - Whether income from property or business - Held, income from business.
Fact of the Case:

The assessee company was incorporated to carry on the business of storing and preserving films and other articles of cinema industry. It constructed 13 units containing vaults, which were constructed and equipped in accordance with the Cinematograph Film Rules, 1948. The company entered into agreements with persons, who wanted to store their films in the vaults. Under these agreements, which were called Licences, use of the vaults was permitted to the vault-holders on their Paying a certain monthly charge. The company was rendering other services to the vault-holders such as installing a fire-alarm, opening railway booking offices, maintaining a staff, etc.
Finding of the Court:

The income, which the company obtained from the licence-holders in the present case, could not be regarded as income from property falling under S. 9 of the Indian Income-tax Act. The activity ct the company in earning that income was a business activity and the source of the income, which me company obtained from the licence-holders, was not the ownership of the house property but its business.
Issues: Whether the income from letting of vaults for storage of films is income from property or business.
Ratio Decidendi: 1. Income-tax is a single tax levied on the total income classified and chargeable under the various heads and not an aggregate of the distinct taxes levied separately on each head of income. 2. That the heads of income in Section 6 of the Act are specific heads, which are exclusive and exhaustive. 3. The income which falls under any of these specific heads has got to be computed under that head only in the manner specified in the following Sections 7 to 12. 4. If the income falls under the head "income from property", which is chargeable under Section 9, it his to be taxed under Section 9 only and cannot be taken to Section 10 on the ground that the business of the assessee was to exploit property and earn income or because the income was obtained by a trading concern in the course of its business. 5. House-owning, however profitable, cannot be a business or trade under the Income-tax Act. Where income is derived from house property by the exercise of property rights properly so-called, the income falls under the head Income from property chargeable under Section 9. It is the nature of the operations and not the capacity of the owner that must determine whether the income Is from property or from trade. Where the operations involved in the activity of earning income from house property are not different from those of an ordinary house-owner turning to profitable account the properly of which he is the owner, the income derived is income from property chargeable under Section 9 irrespective of whether the operations are earned by a company one of whose objects or even the sole object is to indulge in the activity of earning income from house property. Thus, where house property is given on lease or licence basis for earning income therefrom, the true character of the income derived is income from property falling under Section 9. The said character is not changed and the income aces not become income from trade or business lf the luring is inclusive of certain additional services such as heating, cleaning, lighting or sanitation, which are relatively insignificant and only incidental to the use and occupation of the tenements. 6. In cases where the income received is not from the bare letting of the tenement or from the letting accompanied by incidental services or facilities, but the subject hired out is a complex one and the income obtained is not so much because of the bare letting of the tenement but because of the facilities and services rendered, the operations involved in such letting of the property may be of the nature of business or trading operations and the income derived may be income nut from exercise of property rights properly so called so as to fall under Section 9 but income from operations of a tracing nature falling under Section 10 of the Act, and 7. In cases where the letting is only incidental and subservient to the main business of the assessee, me income derived from the letting will not be the income from property falling under Section 9 and the exception to Section 9 may also come into operation in such cases.
Final Decision: The income in the present case was income, which properly fell under Section 10 and was not income from property falling under Section 9 of the Act.

JUDGMENT - Desai, J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act (hereinafter referred to as the Act), and the questions which are raised thereon arise out of the orders of assessment of the National Storage Private Limited, Bombay (respondent herein) for the assessment years 1953-54, 1954-55, 1955-56 and 1956-57. The assessee company was promoted by the Film Distributors of Bombay and was Incorporated on the 23rd of October 1948. The activity of the company, which was set out m clause (1) of the Object clause of the Memorandum of Association was to carry on the business of storing and preserving films, chemicals, cinema accessories and any articles of merchandise in Cinema Industry in suitable vaults specially constructed for the purpose and equipped with all the necessary arrangement. Clause 2 enabled the assessee company to carry on the business of storage of articles in the Cinema Industry and for that purpose to build or construct such other vault or vaults as may be deemed necessary by the company. Clause (3) set out the object of the company as generally to carry of all sorts of business of Safe Deposit Vaults in all us aspects. Clause (5) authorised the company to acquire by purchase or lease a suitable plot of land and to construct thereon safe deposit vaults and other necessary buildings as may be thought fit by the company. What led to the incorporation of this company was the promulgation of the Cinematograph Film Rules, 1948, by the Government of India under which films were required to be stored in specially constructed premises strictly in conformity with the specifications laid down in the said rules and situated at places to be approved by the Chief Inspector of Explosives. Government of India. Under these rules, a place at Mahim was approved by the Chief Inspector of Explosives, Government of India, as a suitable place for the construction of the film godowns. The company alter its incorporation purchased a plot at Mahim, the place which was approved of by the Chief Inspector of Explosives, and constructed 13 units on the said plot of land in conformity with the specifications laid down in the Cinematograph Film Rules of 1948. 12 of these 13 units were constructed for members of the Indian Motion Pictures Distributors Association, who had taken part in the floating of me company and the 13th unit was made available for the use of Foreign Film Distributors in Bombay, who were not members of the Indian Motion Pictures Distributors Association. Each unit consisted of four vaults and each vault had a ground-floor for re-winding of films and an upper floor for storage of films. After the construction of these Units, the vaults were permitted by the company to be used by the Film Distributors on terms and conditions of the Agreements arrived at between them and the company. Some of these agreements, which were entered into with the members of the Indian. Motion Pictures Distributors Association, who had subscribed a large amount towards the share capital of the company, were classifies as A Licenses and the charges for these A Licences, were Rs. 407- per month. The other agreements, winch were entered into with members of the Indian Motion Pictures Producers Association, who had only supplied a small share of capital, were classified as B Licence-holders and were charged at Rs. 140/- per month. The Licences granted to the Foreign Film Distributors, for whom one Unit of four vaults was reserved, were charged at Rs. 300/-per month for each vault at the beginning but later on those charges were reduced to Rs. 100/- per month. Under these Agreements the right to use the vaults was given initially for a period of five years. The vault-holder was given a key of the vault but the key of the entrance, which permitted access to the vaults remained in the exclusive possession of the company. The company also rendered certain services to the vault holders. It had installed a fire alarm and had obta

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