Patna High Court
Commissioner Of Income-Tax vs Bishwanath Roy on 17 May, 1985
Equivalent citations: [1985]156ITR217(PATNA)
JUDGMENT Uday Sinha, J.
1. The assessee in these two references under Section 256(1) of the I.T, Act, 1961, had been assessed in the status of an individual. The assessment years are 1968-69 and 1969-70. The assessee was the owner of Ganeshdih Colliery. It was leased out to Prabhulal Agrawal and Magilal Sharma. The assessee returned an income of Rs. 34,533 as income from business. In view of the lease in favour of the managing contractor, the claim of income from business was rejected by the ITO and it was held to be income from "Other sources". His view was affirmed by the AAC as well both the authorities relying upon New Savan Sugar and Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC). The Appellate Tribunal, however, took a different view of the matter and accepted the claim of the assessee. The Tribunal recorded its conclusions in one short paragraph which may be reproduced here ;
"6. This issue came before the Tribunal in I.T.A. Nos. 529 and 530 (Pat) of 1967-68 in the assessee's own case for the assessment years 1964-65 and 1965-66, where the Tribunal held that the income of the assessee that was received from the managing contractors was assessable under the head 'Business' and not from 'Other sources'. The Punjab High Court also in the case of Nauharchand Chananmm v. CIT [1971] 82 ITR 189 (P & H), has expressed the same view. This being the position, we hold that the income of the assessee is assessable under the head 'Business' and not from 'Other sources'."
2. The appeal of the assessee was thus allowed by the Tribunal. At the instance of the Commissioner of Income-tax, a consolidated reference has been made to this court. The question of law referred to us reads as under:
" Whether, on the facts and in the circumstances of this case, the Tribunal were correct in law in holding that the income derived by the assessee was taxable tinder the head 'Business' and not under the head 'Other Sources' ? "
3. The facts, stated above, appear from the statement of the case transmitted to this court as well as from annexures A, B, C, D and E to the statement of the case.
4. I have quoted earlier the reasons for which it was held that the asses-see's income had to be treated as income from business. Paragraph 6 itself of the order of the Tribunal quoted above shows that it was so held for two reasons. Firstly, that in the assessment years 1964-65 and 1965-66, the Tribunal had held that the income of the assessee received from managing contractors was assessable as " Business " and not from " Other sources ". The second ground was that the Punjab High Court in Nauhar chand Chananram v. CIT[1971] 82 ITR 189, had expressed the view that income from the lease of the kind with which we are concerned must be treated as income from " Business ". The Tribunal thus gave its judgment following the decision of the Punjab and Haryana High Court. The short answer is that the decision of the Punjab and Haryana High Court has been disapproved by this court in Khas Benedih Colliery v. CIT [1974] BBCJ 440. The Tribunal, therefore, erred in the view it took relying upon the case of Nauharchand Chananram [1971] 82 ITR 189 (P & H).
5. The ground that in earlier assessment years, the Tribunal had held such an income as income from business is untenable for the reason that the principle of res judicata has no application to tax cases. Both the grounds put forth by the Tribunal are, therefore, unsound. The decision of the Tribunal was thus based upon fallacious grounds.
6. The assessee having granted the lease to the managing contractor was entitled only to rent/royalty. I have had occasion to examine the deed creating the lease in favour of the managing contractors in the case of Khas Benedih Colliery [1974] BBCJ 440 and CIT v. Sahana and Sons [1976] 102 ITR 437 (Pat), as also in Tax Cases Nos. 85 to 90 of 1976--CIT v. Kuya and Khas Kuya Colliery Co. [1985] 156 ITR 206, which have been disposed of today. I have not the least doubt that by executing a lease in favour of the managing contractor, the lessor/contractor/managing agent completely disassociates himself from the business. Nothing was brought on the record in this case to show that the assessee had retained control over the business of the colliery. The ITO observed in his order that after handing over the colliery, the assessee ceased to carry on mining business. This finding was not challenged by the assessee in appeal before the AAC nor did the Tribunal hold that the assessee had not disassociated himself from the business. I have, therefore, no difficulty in holding that the lease was the lease of the colliery business itself and not merely of commercial assets. Thus, relying upon the cases of New Savan Sugar and Gur Refining Co. Ltd. [1969] 74 ITR 7 (SC) and Khas Benedih Colliery [1974] BBCJ 440, I am definitely of the view that the assessee had no concern with the business of the colliery. The income of the assessee under the lease could not, therefore, be treated as income from business. It has to be treated as income from other sources. The Tribunal grievously erred in the view it took in the matter.
7. For the reasons stated above, I am definitely of the view that the Tribunal was not correct in holding that the income derived by the assessee was taxable under the head ."Business" and not under the head" Other sources". The question referred to this court must, therefore, be answered in favour of the Revenue 'and against the assessee. The reference is thus disposed of with costs. Hearing fee Rs. 250 payable by the assessee to the Revenue.
Nazir Ahmad, J.
8. I agree.