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Issues: Whether rental income from buildings owned by the assessee and let to its employees or wage earners was assessable as income from property under section 9 of the Indian Income-tax Act, 1922, or as profits and gains of business under section 10 of that Act.
Analysis: The buildings were owned by the assessee and were used to house employees near the mills in furtherance of the company's business. The rent was fixed, deducted from wages, and the accommodation was treated as an incident of the business and part of its business equipment. Reading sections 9 and 10 together, income from property occupied for the purposes of business falls under section 10. The word "occupy" was held not to be confined to actual physical occupation; occupation through employees or tenants in such a business context was sufficient. The reasoning was supported by the administrative circular and by the view that the property was subservient to the business.
Conclusion: The rental income from the buildings let to employees was assessable as business income under section 10 and not as income from property under section 9, and the decision was against the department.
Ratio Decidendi: Where residential accommodation owned by an assessee is provided to employees as an incident of carrying on the business, the property is treated as occupied for business purposes and the rental income therefrom is assessable under the business head, not under the property head.
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