Estimated forex contract profits excluded; rental income taxed as house property income u/s 22, not business profits

HC held that estimated profit from foreign exchange contracts could not be included in the assessee's total income, following its earlier decision in the assessee's own case, and thereby rejected the Revenue's stand on this issue. On the rental income issue, HC upheld the Tribunal's conclusion that income from letting out part of the assessee's building to tenants constituted "Income from house property" and not "Profits and gains of business or profession". The Court found no nexus between the assessee's banking business and the letting activity, and affirmed assessment of such rental income exclusively under the head "Income from house property".

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Issues involved: Assessment of profit on contracts in foreign exchange and assessment of rent received from tenants of business premises.

Assessment of profit on contracts in foreign exchange: The Income-tax Appellate Tribunal referred two questions of law regarding the inclusion of estimated profit on contracts in foreign exchange in the total income of the assessee. The Tribunal had assessed the profit as part of the total business income, but the assessee challenged this decision. The court considered a previous judgment where it was held that notional profit on forward contracts in foreign exchange, without actual settlement, cannot be taxed. The Revenue did not contest this position, leading the court to rule in favor of the assessee, stating that the estimated profit was not liable to be included in the total income.

Assessment of rent received from tenants: The second question pertained to the assessment of rent received from tenants of the business premises. The Income-tax Officer added the rental income as income from property, rejecting the assessee's claim that it should be assessed as income from business due to close business connections with the tenants. The court disagreed with this argument, emphasizing that income from letting out property falls under "Income from house property" and cannot be claimed as "Income from business or profession." It was noted that there was no business link between the tenants and the banking business of the assessee. Therefore, the court upheld the Tribunal's decision to assess the rental income under the head "Income from house property," ruling against the assessee and in favor of the Revenue.

In conclusion, the court ruled in favor of the assessee regarding the profit on contracts in foreign exchange but against the assessee concerning the rental income from tenants, affirming the assessments made by the Income-tax Appellate Tribunal.

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