EVEREST HOTELS LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is an appeal against the judgment and order of B.N. Banerjee J., dated the 19th June, 1963, We have to decide "whether the assessee's rental income out of a lease should be taxed under Section 10 or Section 12(4) of the Indian Income-tax Act, 1922 ?"

(2.) The appellant, since 1927, has been carrying on the business of a hotel under the name and style of "Hotel Mount Everest" at Darjeeling. On the 23rd October, 1952, the appellant executed an indenture of lease in favour of Messrs. Hotels (1938) Private Ltd. with effect from 1st November, 1952, at a consolidated leasehold rent of Rs. 75,000 per annum for a period of 5 years. The entire business of Hotel Everest, its goodwill, buildings, furniture, equipments, etc., were let out to Messrs. Hotels (1938) Private Ltd. under this indenture. On the expiry of the period of the lease, the appellant resumed its business on the 1st April, 1958.

(3.) Now, under Section 9 of the Indian Income-tax Act, 1922, tax is payable by an assessee under the head "Income from property" in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax. Under Section 10, tax is payable by an assessee under the head "Profits and gains of business, profession or vocation" in respect of the profits or gains of any business, profession or vocation carried on by him.