Rental income from long-term lease commercial complex-taxed as house property income u/s22, not business profits u/s28.

Income from letting out a commercial complex constructed on land held under a long-term registered lease was whether assessable as "Income from house property" under s. 22 or "Profits and gains of business" under s. 28. Applying SC rulings that "owner" in s. 22 includes a person entitled to receive income in its own right, the HC held the assessee must be treated as owner since it built the complex and alone derived rent. The assessee's corporate object of earning income by leasing properties did not convert rental receipts into business income, as letting yields house property income unless inseparably linked to business operations. The Tribunal's order was set aside and the Revenue appeals were allowed, directing assessment under s. 22.

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Issues:
Assessment of income from letting out house property under "Income from house property" or "Income from business"

Analysis:
The case involved a dispute regarding the assessment of income derived from letting out a commercial complex under the Income-tax Act, 1961. The primary issue was whether the income should be assessed under the head "Income from house property" or "Income from business." The assessee, a private limited company, had acquired leasehold rights to land and constructed a commercial complex on it, earning income from rentals. The Commissioner of Income-tax initiated revisional proceedings under section 263, contending that the income should be assessed under the head "Income from house property." The Tribunal, however, ruled in favor of the assessee, determining that the income should be treated as income from business due to the leasehold nature of the land.

The Tribunal's decision was challenged before the High Court, which referred to the Supreme Court's ruling in CIT v. Podar Cement (P.) Ltd. The Supreme Court had clarified that for the purposes of section 22 of the Income-tax Act, the term "owner" should be interpreted as a person entitled to receive income from the property in their own right. Applying this interpretation to the present case, where the assessee had constructed the commercial complex and earned rental income directly, the High Court concluded that the assessee should be considered the owner of the property. Therefore, the income had to be assessed under the head "Income from house property."

The High Court also addressed the arguments based on previous judgments, such as S.G. Mercantile Corporation (P.) Ltd. v. CIT and Balaji Enterprises v. CIT. It noted that these judgments did not directly apply to the current case and that the interpretation of the term "owner" as per the Supreme Court's ruling in Podar Cement (P.) Ltd. was the determining factor. Consequently, the High Court set aside the Tribunal's order and allowed the appeals, affirming that the income derived from the commercial complex should be assessed under the head "Income from house property."

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