House-property income from buildings on leased land remains taxable as property income when lessee ownership continues during the lease.

Rent from buildings erected by a lessee on leased land was assessable as income from property where the lease showed the lessee bore construction costs, paid municipal tax, and retained ownership of the structures during the lease term, with the lessor's entitlement arising only on expiry or a contractual contingency. On that footing, the annual value of the let buildings fell within the house-property charging provision, and the assessee's business objects of acquiring and letting houses did not convert such receipts into business profits. The rent was therefore taxable under Section 9, not as business income under Section 10.

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Issues: Whether rent derived from buildings erected by the assessee on leased land was taxable as income from property under Section 9 of the Income-tax Act, or as business profits under Section 10.

Analysis: Under Indian law, a lessee who erects buildings on leased land ordinarily retains ownership of the structures during the currency of the lease, unless the lease provides otherwise; the lessor's right may arise only on the expiry of the term or on the happening of a contractual contingency. The lease in question showed that the assessee bore the cost of construction, paid the municipal tax on the structures, and retained ownership during the lease, while the lessor's entitlement was deferred until the lease ended. Once ownership during the lease was established, the statutory scheme required assessment of the annual value of buildings let to tenants under Section 9. The mere fact that the assessee company's objects included acquiring and letting out houses did not convert house-property income into business income.

Conclusion: The rent from the buildings was properly assessed under Section 9 as income from property, not under Section 10 as business profits, and the answer to the reference was in the affirmative.

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