TaxTMI 
TaxTMI 
1972 (10) TMI 27
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.... the corresponding financial years ending March 31, 1958, and March 31, 1959. The assessee is the owner of three house properties. One of them has been equipped as a cinema theatre. All the three house properties were mortgaged with a view to secure repayment of losses in his speculation business. There were two mortgages in respect of these properties. Under the first mortgage deed all the three properties were mortgaged with a view to secure repayment of a loan of Rs. 3 1/2 lakhs and the interest payable thereunder. Later on, the assessee created a second mortgage in respect of the very same three mortgaged properties. On June 29, 1956, a partnership was formed, consisting of three partners, viz., the assessee, his son, Madhukar, and a limited company known as Gouri Sons Pvt. Ltd., a company managed, controlled and owned by Kapurs. The partnership business was carried on under the name and style of Kay and Kay Exhibitors. The business of this partnership was that of running Kohinoor Cinema and of exhibiting the cinema films at the said cinema theatre and the management of the said Kohinoor Cinema. The partnership business was to be carried on at the premises of the said Koh....
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....ection 12 on the ground that the said outgo was not any expenditure incurred by the assessee solely for the purpose of making or earning the rental income concerned. On appeal by the assessee, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On appeal before the Income-tax Tribunal, firstly, it was urged on behalf of the assessee that the assessments that were originally made by the Income-tax Officer for the first two years were correctly made and that the revised assessments were made erroneously, and, secondly, it was contended that the income from the Kohinoor Cinema Theatre building should have really been assessed to tax under section 9 and not under section 12. The Tribunal did not express any opinion on the first of the above two contentions, but so far as the second contention was concerned, it accepted the assessee's contention and took the view that the income from the Kohinoor Cinema Theatre building should really have been assessed to tax under section 9 and not under section 12. In making this order, the Tribunal laid emphasis on the fact that there was a separate agreement of lease in respect of the building of Kohinoor Cinema Theat....
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....h a view to secure the repayment of the principal amount due to the mortgagee together with interest. Thus the mortgage security is one and indivisible. It is always open under such circumstances to a mortgagee to proceed against any one or more or all the properties mortgaged for the purpose of realising the entire amount of principal and interest due to him under the mortgage. For the two assessment years, the total amount of interest payable to the mortgagee was Rs. 55,320 and Rs. 58,072. Under section 9(1) the tax shall be 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 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 which are assessable to tax are subject to the allowances specified in the latter clauses of the said sub-section. We are concerned in the present case with the allowances permissible under clause (iv) of the said sub-section. Under that clause (iv) where the property is subject to a mortgage or other capital charge, the amount of any inte....
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....ons of sub-section (4) of section 12 apply. The Tribunal, following these observations, took the view that there was an irresistible conclusion that the letting of the building of Kohinoor Cinema was not a secondary one but it was the primary one and that the letting of the machinery and furniture was the secondary one. According to the Tribunal, the phrase " cinema theatre " in the lease transaction was the cinema theatre as the Kohinoor Cinema and the other things such as furniture, machinery, etc., were mentioned as subsidiary items. According to the Tribunal, the income from the cinema theatre should be computed under section 9 of the Act and left it to the department the question of apportionment of the rent of the theatre receivable for machinery and plant. The argument of Mr. Hajarnavis is that such approach is not permissible if regard be had to the provisions of section 12(1)(iv) thereof. Reliance was placed by him upon the decision of the Supreme Court in that very matter. The judgment of the Supreme Court is Sultan Brothers (Private) Ltd. v. Commissioner of Income-tax. The Supreme Court took the view that when a building and plant, machinery or furniture are inseparab....