D C SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) : The assessees in these cases are co-owners of a building constructed on Plot `C', Shivasagar Estates, Bombay. The assessment years are 1968-69 to 1972-73. During the asst. yrs. 1968-69 to 1971-72, the said building belonged to 16 co-owners. During the period between April 1, 1971, and March 28, 1972 the said building was owned by 18 co-owners; on March 29, 1972, it was owned by 19 co-owners and on the last two days of that year, i.e., 30th and 31st March, 1972, it was owned by 19 co-owners, but one co-owner who owned the property on March 29, 1972, Mrs. A. D. Shah, was substituted by another co-owner, A. D. Shah Private Limited, on the 30th and 3lst March l972. It is not necessary for the purpose of these cases to refer in detail to the manner in which the co- owners acquired title to the building in question in the course of this order. The particulars thereof are, however, set out in detail in the statements of cases submitted to this Court. The co-owners who had acquired title to construct a building on the plot in question entrusted the construction work to M/s Kiron Construction Company and also authorised them (M/s Kiron Contruction Co.) to negotiate the terms of lease with the lessee, the State Bank of India, which required the said building for its own occupation and use with the right to sub-let if necessary. One of the partners of M/s Kiron Construction Company was Mahendrabhai Shah, who was also connected with another firm, M/s Jivanlal & Co. On February 23, 1966, the chief officer (premises), State Bank of India, wrote a letter to M/s Jivanlal & Co. (attention Sri Mahendrabhai Shah) offering the terms under which it was willing to take the building on lease. The relevant terms which were set out in the said letter were the following :

(2.) IN reply to the said letter, a reply was sent by M/s jivanlal & Co. on March 4, 1966, to the State BanK of INdia setting out the counter proposals in connection with the lease of the building in question. IN para. 3 of that letter, it was stated as follows :

(3.) WE trust this information furnished is adequate for, your requirement" After hearing the assessee, the ITO passed an order of assessment treating the income received by way of rent of the building and the income received for providing the air- conditioning facility as income falling within the scope of s. 56(2)(iii) of the Act realised by the co-owners as constituting a BOI after rejecting their case that the rent received in respect of the building had to be assessed under s. 26 of the Act. Aggrieved by the order of the ITO, the assessee filed appeals before the AAC. The AAC allowed the appeals partly. He held that the income realised by way of rent in respect of the building was liable to be assessed under s. 26 of the Act and the co-owners of the building had to be assessed separately on the basis of their individual share of income received by way of rent of the building. In so far as the income received for providing air- conditioning facility was concerned, he held that there was a lease of the air-conditioning plant in favour of the lessee but that lease was, however, separable from the lease of the building. Accordingly, he assessed the income realised under the lease of the air-conditioning plant under s. 56 of the Act after treating it as income accruing from a common venture in the hands of a BOI or AOPs. Against the order of the AAC passed in the appeals, the ITO filed appeals before the Tribunal. The Tribunal allowed the appeals, set aside the order of the AAC and restored the orders of assessment passed by the ITO for the asst. yrs. 1968-69 to 1971-72.