Business profits tax excludes house income assessed under a different head, despite stock-in-trade character in money-lending business.

Income from houses treated as stock-in-trade of a money-lending business, though assessable under section 9 of the Income-tax Act, 1922, could not be shifted into business profits under section 10. Under the Business Profits Tax Act, 1947, only profits chargeable according to section 10 of the 1922 Act could enter the tax base, and the special provisions in rule 3 of Schedule I and the proviso to section 2(3) did not apply to this kind of business. The properties therefore remained outside business profits tax.

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Issues: Whether income from houses treated as stock-in-trade of the assessee's money-lending business, though assessable under section 9 of the Income-tax Act, 1922, could also be brought into the taxable profits of the business under the Business Profits Tax Act, 1947.

Analysis: The income from the houses was rightly assessed under section 9 of the Income-tax Act, 1922 and could not be moved to the head of business profits under section 10 of that Act. Under section 2(3) of the Business Profits Tax Act, 1947, read with section 2(16), section 4 and rule 1 of Schedule I, only profits chargeable according to section 10 of the Income-tax Act, 1922 could enter the computation of business profits tax. Rule 3 of Schedule I and the proviso to section 2(3) applied only in the special cases specified therein and did not extend to a money-lending business of this kind. The fact that the houses formed part of the stock-in-trade did not alter the statutory test.

Conclusion: The income from the houses was not chargeable as business profits under the Business Profits Tax Act, 1947 and was excluded from the tax base.

Final Conclusion: The reference was answered in favour of the assessee, with the income from the properties held outside the charge to business profits tax.

Ratio Decidendi: Under the Business Profits Tax Act, 1947, only those profits of a business that are computable under section 10 of the Income-tax Act, 1922 can be included in the charge to business profits tax; income falling under another head remains excluded unless a specific deeming provision applies.

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