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3. The facts leading to the appeal may briefly be stated as follows. There is a land measuring 2000 sq. ft. or 8 grounds at 8, Haddows Road, Madras. On 17-4-1973, two persons by name Smt. B.V. Ramanamma and Shri BWS Ramesh Kumar, her son, purchased the whole extent of Rs. 2000 sq. yds. under registered sale deeds. Subsequently they sold two plots of 500 sq. yds. each to Smt. P. J. Jayalakshmi, daughter of Smt. Ramanamma and to Shri P.V. Krishna Rao, brother-in-law of Smt. Jayalakshmi under separate sale deeds dated 5-1 -1976. All four of them along with Shri BWS Ramesh Kumar representing the HUF constituted into a partnership for the purpose of constructing buildings/office complex and deriving rental income by letting out to several parties. They entered into a partnership by means of a partnership deed dated 17-5-1978. Each of the five partners had equal shares in it. Four co-owners of the land brought their respective extents into the partnership towards their share by valuing each of their shares at Rs. 50,000. Each co-owner brought Rs. 1,00,000 towards their capital contribution. Thus each of the four co-owners of the land brought Rs. 1.50 lakhs towards each of their shares. Shri B.V.Ramaiah representing his HUF brought Rs. 1,50,000 into the partnership towards his share. They constructed multi-storeyed buildings under the name and style of M/s. Jayalaskhmi Estates in the said extent of 2000 sq. yds. The construction started in February 1979 and completed in December 1981. Cost of construction was Rs. 38 lakhs. Apart from the capital contribution as stated above, remaining cost of construction was met out of borrowed funds. While so, on 1-10-1982, Shri P.V. Krishna Rao, one of the co-owners retired from the partnership firm. He walked out of the firm after accepting the amounts standing to his credit in his capital account and nothing more. After Shri P.V. Krishna Rao made the exit from the firm, the remaining four partners continued in the firm having equal shares. Again on 1-7-1984, M/s. Jayalakshmi Estates Ltd., a Limited Company, became a partner by contributing Rs. 8 lakhs as its share capital. At the time of allowing the limited company to be a partner the value of the building was arrived at about Rs. 40 lakhs. Therefore, after accepting Rs. 8 lakhs from the Limited Company towards its capital contribution it was allotted share of 20% in the partnership. Thus after 1-7-1984, again 5 partners each having 20% share continued in the firm. As the matter stands thus Smt. B.V. Ramanamma died on 13-6-1986 leaving a Will by which she bequeathed her interest in the partnership equally between her husband, Shri B.V. Ramaiah (Individual) and Smt. S.B. Ranganayaki (aunt of B.B. Ramaiah) in equal shares. The only business carried on by the partnership was 'to acquire by purchase, lease, exchange or otherwise, land, buildings and heriditaments of any nature and description situated in the city of Madras or elsewhere and any estate or interest therein and any rights over or connected with land and to turn the same into account and in particular by preparing building sites and by constructing, reconstructing, altering, improving, decorating, furnishing and maintaining offices, flats, houses, shops, godowns and conveniences of all kinds and by consolidating or annexation or sub-dividing properties by leasing and disposing of the same and to carry any other business that may be decided by the partners from time to time. The only activity undertaken by the firm was to construct a multi-storeyed building over the above said vacant land and to let it out in parts to several tenants. Shri B.B. Ramaiah and Smt. S.B. Ranganayaki who were the successors to in interest of Smt. B.V. Ramanamma have equally divided the fixed capital of Rs. 1.5 lakhs left behind by Smt. Ramanamma and credited the same as their respective capital contributions in the firm.

(1) Sri B.B. Ramaiah (HUF) (2) Sri BWS Ramesh Kumar (3) Sri P.J. Jayalakshmi (4) Shri B.B. Ramaiah (Individual) (5) Smt. S.B. Ranganayaki.

The first three among them held 20% each whereas the last two held 10% share each. It is no doubt that M/s. Jayalakshmi Estates Ltd. had no title to the land but having contributed Rs. 8 lakhs towards its share capital it has acquired title in the building constructed or in the complex which was constructed on the land. So also S.No. 1 having contributed Rs. 1.5 lakhs acquired title in the complex constructed. Rest of the co-owners having held 80% share in the land allowed Jayalakshmi Estates to become one of the co-owners and it was also permitted to enjoy the common property along with them. The objection that there is no relationship whatsoever between the capital contribution made by different co-owners at different points of time to the original cost of the building or the share ascribed to them is not correct. We have already stated how the co-owners in the beginning had contributed equally Rs. 1,50,000. Afterwards every time a fresh deed of partnership was executed the co-owners always equalised their shares with reference to the value of the property. It is already stated that when Shri P.V. Krishna Rao walked out of the partnership firm, he had taken away only what remained in his capital account without demanding his share in the value of the property. Therefore, at the time of his exit from the partnership firm, the remaining 4 co-owners only began enjoying the common property with equal rights. While so, at the time when Jayalakshmi Estates was admitted as a partner, the common property was valued at Rs. 40 lakhs. The co-owners are four and including the newly admitted co-owner they are five. Therefore, unless the newly admitted co-owner contributed towards his capital 1/5th share in the value of the property, it was not admitted. Thus the contribution of Rs. 8 lakhs by Jayalakshmi Estates would show that the parties always tried to equalise their shares with reference to the value of the common property held by them. After Jayalakshmi Estate also was admitted as a co-owner there are five partners each holding 20% share. On 13-6-1986 one of the co-owners, namely, Smt. B.V. Ramanamma died and her share went to her legatees, namely, ShriB.B. Ramaiah and Smt. S.B. Ranganayaki in equal proportions. Thus her 20% interest was divided equally between them and each of the legatees thus held 10% share in the common property. Therefore, ultimately after 14-6-1986, there are six partners holding interest shown against each of them as under :

  (1)   Shri B.B. Ramaiah (HUF)             -      20%
(2)   Smt. P.J. Jayalakshmi               -      20%
(3)   Shri BWS Ramesh Kumar               -      20%
(4)   M/s. Jayalakshmi Estates            -      20%
(5)   Shri B.B. Ramaiah (Individual)      -      10%
(6)   Smt. S.B. Ranganayaki               -      10%

 

Thus each of the co-owners held proportionate shares in the common property with reference to the value thereof and therefore, we hold that in view of the ratio of the Rajasthan High Court's decision in Saiffuddin's case (supra), even though M/s. Jayalakshmi Estate and B.B. Ramaiah (HUF) had no title originally in the land on which the complex was constructed inasmuch as it had contributed l/5th in the total value of the common property at the time when they were admitted as co-owners they became co-owners of 1/5th share each. In the facts of the Rajasthan case also, the assessee purchased a plot on which subsequently 'Park View Hotel' was constructed. The plot was purchased for Rs. 53,200. The said amountwas debited in the account of the assessee with a firm M/s. Khan Mohd. Katha, Trading Co., Udaipur. Subsequently the entries were reversed crediting the accounts of the assessee in the firm by Rs. 53,200 and debiting his account and the two other co-owners, namely, Allah Bux and Abid Ali by Rs. 17,733. Regarding the amounts spent for construction the co-owners Allah Bux and Abid Ali also bore the cost of construction and ultimately Park View Hotel came into being on the said land. The question was whether the income from property shall be taxed in the hands of the assessee exclusively. The findings of the Tribunal were summed up as follows :

17. Now let us consider whether the income earned by M/s. Ramaiah & Co. belongs to the said firm or belongs to the assessee AOP. Admittedly the income was derived by M/s. Ramaiah & Co. only for providing amenities to the lessees in the office complex situated at 8 Haddows Road, Madras which belongs to the assessee AOP. We have already stated that M/s. Ramaiah & Co. did not obtain either a licence or anything in writing from the assessee-AOP under which the assessee AOP had given its consent for Ramaiah & Co. to provide the amenities or facilities to the tenants. Without being the owner of the building or without obtaining any licence or permission from the owner of the building how can Ramaiah & Co. provide amenities to the tenants ofthe Office Complex at 8, Haddows Road, Madras which exclusively belongs to the assessee AOP? What is the legal right vested in M/s. Ramaiah & Co. to collect rents under amenities agreement and how can such rights prevail over the exclusive rights of ownership in the said building belonging to the AOP? When the open space in the premises or when the stair case in the premises or when the space where lifts were fixed belonged to the assessee, how can Ramaiah & Co. make use of those space and collect rents for the so-called amenities provided for. To put in a nutshell when the whole building belong to the assessee AOP absolutely and when it is not subjected to either mortgage, lease or licence, Ramaiah & Co. would not be left with any title to erect the so-called conveniences to let the tenants use them over which it could collect monies. However, in this case one cannot deny payment of moneys under amenities agreement. The question is who is the lawful owner entitled to collect such charges for providing amenities. In our opinion, unhesitatingly it is the assessee who is entitled to collect the charges for providing amenities to the tenants and definitely not M/s. Ramaiah & Co. In our considered opinion, simply because Ramaiah & Co. invested the amount of Rs. 8.39 lakhs in order to provide electrical fittings, fans, lift, generator, furniture and air-conditioner in the said building that by itself would not entitle the said firm to collect rents from the tenants on the ground that it had provided amenities. Unless and until M/s. Ramaiah & Co. was able to show that investments were made by it in electrical fittings, fans, generator, furniture, air-conditioner etc. were all provided in the building with the consent or permission of the assessee AOP on agreed terms, M/s. Ramaiah & Co. cannot claim that the income under the amenities agreement belonged to it. How Ramaiah & Co. is able to recover Rs. 8.39 lakhs which it had invested is quite a different matter and beside the point, which need not be dilated in this order. Shri B.B. Ramaiah and Smt. P.J. Jayalakshmi are the co-owners in the AOP (assessee) and they are also shown as partners in M/s. Ramaiah & Co. Since B.B. Ramaiah is the person who is allowed to manage the affairs of both the assessee AOP as well as the firm he might have thought to charge the rentals under two separate heads, one for occupation and another for providing facilities in the premises, only as a tax saving device. The obligation of operating lifts, maintaining stair-case, providing water, putting up points for tube-lights, fans etc. go along with lessor's obligation or large buildings like office complexes. Any rent realised therefrom would only be taxable under Section 22 to Section 26. We have already cited from an English case in Salisbury House Estates Co. Ltd.'s case (supra) which was approvingly quoted by the Hon'ble Supreme Court in East India Housing & Land Development Trust Ltd. 's case (supra). In that case a company was formed to acquire, manage and deal with a block of buildings, having let out the rooms as unfurnished offices to tenants. The company itself had provided staff to operate lifts, to act as porters, provided watch and ward to protect the building and also provided certain services such as heating and cleaning to the tenants at an additional charge. The question was whether the income derived was assessable as property income or business income. Their Lordships held that it is property income.