Case: Karnani Properties Ltd Vs. Commissioner Of Income Tax, West Bengal

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 19564. 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 Companys 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 correct6. 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 assessees 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 97. 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 income from business. Neither to Revenue nor the assessee contended that the same was assessable under Section 9 nor was there any dispute as regards that part of the receipt which was brought to tax under Section 9. The Appellate Assistant Commissioner rejected the contention of the assessee and affirmed the decision of the Income-tax Officer8. Aggrieved by the decision of the Appellate Assistant Commissioner the assessee took up the matter in appeal to the Income-tax Appellate Tribunal, challenging the finding of the Income-tax Officer as well as the Appellate Assistant Commissioner as to the true character of that part of the receipts which had been brought to tax by the Income-tax Officer under Section 12. The assessee contended that the said amount should have been assessed under Section 10 and the Departments case was that the Income-tax Officer had rightly assessed the same under Section 12. Neither the assessee nor the Department contended before the Tribunal that the same was assessable under Section 9. The Tribunal accepted the contention of the assessee that the amount in question is assessable under Section 10. Thereafter at the instance of the Department the question set out earlier was referred to the High Court of Calcutta for its opinion9. The High Court of Calcutta did not accept the contention of the Department that the amount in question is assessable under Section 12 of the Act. On the other hand, it came to the conclusion that the same was assessable under Section 9 of the Act. As seen earlier the Department had all along proceeded on the basis that that amount was not assessable under Section 9 of the Act. If the Department had sought to assess that amount under Section 9. It was open to the assessee to claim the allowances to which it was entitled under Section 9. The Department having all along proceeded on the basis that the income of the assessee was income from two different sources should not have been allowed to change its case. The High Court opined that some of the facts found by the Tribunal are not correct. That finding was arrived at on reappraisal of the evidence on record. As seen earlier the question whether the findings of fact reached by the Tribunal were vitiated for any reason was not before the High Court. The jurisdiction of the High Court in dealing with a Reference under Section 66 is a very limited one. It must take the fact as stated in the statement of the case unless the question whether the findings of the Tribunal are vitiated for one or the other of the reasons recognised by law is before it. It may be that the Income-tax Officer, the Appellate Assistant Commissioner as well as the Tribunal which we are concerned in these appeals came from two different sources but then that question was foreign to the proceedings before the High Court. The High Court had to accept the facts as found by the Tribunal and should have answered the question referred to it on the basis of these facts

Reasoning: 10. From the facts found by the Tribunal it follows that the services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organized manner with a set purpose and with a view to earn profits. Hence those activities have to be considered as business activitiesWhen the question referred to the High Court speaks of "on the facts and the circumstances of the case", it means on the facts and circumstances found by the Tribunal and not about the facts and circumstances that may be found by the High Court. We have earlier referred to the facts found and the circumstances relied on by the Tribunal, the final fact finding authority. It is for the Tribunal to find facts and it is for the High Court and this Court to lay down the law applicable to the facts found. Neither the High Court nor this Court has jurisdiction to go behind or to question the statements of facts made by the Tribunal. The statement of the case is binding on the parties and they are not entitled to go behind the facts found by the Tribunal in the Statement -See Kshetra Mohan Sannyasi Charan Sadhukhan v. Commr. of Excess Profits Tax. West Bengal, (24 ITR 488   = (AIR 1963 SC 516  ))14. Mr. Manchanda was apprehensive that our decision in this case may have far reaching effect inasmuch as that the same may be considered as having laid down the rule that whenever a premises is let out with fixtures and furniture for a consolidated rent or when the landlord in addition to providing fixtures and furniture also renders services incidental to the letting out of the premises and charges a consolidated rent, it may be considered that the rent realised would have to be split up and assessed separately partly under Section 9 and partly under some other provision. There is no basis for this apprehension. Herein we are not considering any abstract proposition of law. We are only laying down the law applicable to the facts foundAppellate Assistant Commissioner and the Tribunal in the assessees case in the subsequent years. This apprehension may again be not well founded. Generally speaking the rule of res judicata does not apply to taxation proceedings. We have not gone into the correctness of the findings of fact reached by the Tribunal. Therefore whether those facts and circumstances were correctly found or not may still be a matter for consideration in any future assessment. We do not wish to say anything more on this aspect as we do not want to pronounce on questions which are not before usProperty is regarded as yielding income from the exercise by the proprietor of the right either of himself with the possession by letting his property to tenants. The owner of property may make profit out of it in other ways and by doing so he may render himself liable to taxation under Sch. D. The case ofs of the Rotunda Hospital, Dublin v. Coman. (1921) I.A.C.1, is an excellent example. There as Lord Chancellor Lord Birkenhead pointed out at page 8 (7 Tax Cases 517 at page 576) the arrangements between the owners of the premises and the persons who paid for their use for the purpose of entertainments were not such as to constitute the relation of landlord and tenants, and the owners remained in possession and occupation of their propertyThe receipts derived from hiring out their premises along with various movable fittings, and affording services in the way of heating, lighting and attendance were receipts of an enterprise quite distinct from the ordinary receipts which a landlord derives from letting his propertyConsequently the owners of the premises were rightly held to be engaged in the carrying on of a trade or business in their premises, "the trade or business" in Lord Shaws language at p. 37 (Ibid at p. 593) of providing or providing for public entertainment. There is nothing to prevent a landlord who has been assessed under Schedule A in respect of his income as a property owner being also assessed under Schedule D in respect of a trade business or other enterprise carried on by him on his premises"12. We are referring to these observations only to show that the activities of the assessee with which we are concerned in these appeals are business activities. We should not be understood as having laid down that in assessing the profits and gains of a business, the profits and gains arising from the several activities of that business can be separately computed or separately brought to tax.If the facts are as found by the Tribunal we must assume for the purpose of this case that the facts were correctly found by the Tribunal as there was no challenge to the correctness of those findings in the question referred to the High Court, then it is quite clear that the assessee had two sources of income and not one source as found by the High Court.