COMMISSIONER OF INCOME TAX Vs. SARABHAI PRIVATE LIMITED

JUDGEMENT

(1.) he Commissioner of Income-tax, Ahmedabad applicant has filed this Reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as he Act'). At the instance of the Revenue the following questions are referred for the opinion of this Court.

(2.) BASIC FACTS:Sarabhai Private Limited, assessee, respondent herein, is a Company incorporated under the Companies Act. It has the following properties, namely, (i) Shahibaug House situated at 13 Wittest Road, Bellard Estate, Bombay, (ii) Ahmedabad House situated at 15, Wittest Road, Bellard Estate, Bombay, (iii) Kashmir House, situated at 94, Napean Sea Road, Bombay and (iv) Shanti Sadan Estate, Mirzapur Road, Ahmedabad. The assessee let out all these properties to its various tenants. As regards Shahibaug House, the assessee entered into an agreement on 26.7.1971 with the tenants. As regards the Ahmedabad House the assessee entered into agreement on 19.8.1971. Subsequently, the said agreements were entered into to give the properties on lease as well as to provide certain services, amenities and facilities by the assessee (landlord) to its tenants. As regards other properties, similar agreements are entered into but same are not on record. Some of the services which were to be provided were (i) Housekeeping which includes watch and ward, sweepers, maintenance staff and liftman, (ii) Canteen facilities, (iii) Internal telephone exchange, (iv) Maintenance staff for central air-conditioning including air-conditioning units, electrical fittings etc. (v) Providing water coolers, (vi) Recreation corner (vii) Creation and Maintenance of facilities for locating central air-conditioning plant, (viii) Providing furniture and fixtures, (ix) Electrification, (x) Providing costly electrical installations, (xi) Providing special facilities for external telephones and telex.

(3.) PREVIOUS BACKGROUND:However for assessment years 1972-73 and 1973-74 income was returned under the head "income from house property". In assessment year 1973-74 the assessee company during the course of assessment proceedings requested the Income-tax Officer (hereinafter referred to as "the ITO") to tax the income from service charges under the head "income from business". The I.T.O. rejected this claim of the assessee which was upheld by the Appellate Assistant Commissioner. The assessee company had not preferred any appeal before the Income-tax Appellate Tribunal against the said order.