Composite film vault licensing receipts taxed as business income, with operational control taking the case outside property income.

Receipts from licensing specially constructed film vaults were treated as business income because the arrangement was a composite commercial enterprise, not a bare letting of immovable property. The company had equipped the vaults for film storage, provided supporting facilities and staff, and retained operational control, so the income arose from organised business activity rather than from property ownership alone. On the same facts, the premises were regarded as being occupied by the company for its business, bringing the case within the statutory exception to income from property. The reference was answered in favour of the assessee.

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Issues: (i) Whether the income derived from granting licences for use of specially constructed film vaults was assessable as income from property under section 9 or as income from business under section 10; (ii) whether the company was in occupation of the premises for the purposes of its business so as to take the case outside section 9.

Issue (i): Whether the income derived from granting licences for use of specially constructed film vaults was assessable as income from property under section 9 or as income from business under section 10.

Analysis: The source of the receipts was not a bare letting of house property. The company had constructed and equipped specialised vaults to comply with film-storage rules, maintained supporting facilities and staff, and charged for a composite arrangement that included the use of the vaults together with services and conveniences essential to the storage activity. Where the subject hired out is a complex one and the receipts arise substantially from facilities and operations rendered in the course of an organised enterprise, the income is not derived merely from the exercise of property rights properly so called.

Conclusion: The receipts were income from business and fell under section 10, not section 9, and the finding was in favour of the assessee.

Issue (ii): Whether the company was in occupation of the premises for the purposes of its business so as to take the case outside section 9.

Analysis: The company retained control over access, continued to maintain the premises and their devices, and carried on the business of safe storage of films through the vault system. On those facts, the premises could be regarded as being in the company's occupation in the course of its business, bringing the case within the statutory exception to section 9.

Conclusion: The exception to section 9 applied and this issue was also decided in favour of the assessee.

Final Conclusion: The reference was answered in a manner that upheld assessment of the receipts under the business head and rejected the revenue's attempt to treat them as income from property.

Ratio Decidendi: Where a composite and specialised letting is coupled with substantial facilities and operational control, the receipts are attributable to a business enterprise rather than to mere ownership of property, and section 9 does not apply.

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