Commercial exploitation of leased property can yield business income where the asset is developed and run as a trading venture.

Lease rentals and maintenance charges from a commercially developed complex were assessed as business income because the assessee took land on lease, constructed the complex from its own funds, and commercially exploited it as a trading asset. The provision of watch and ward, maintenance, water supply, lifts, generators, power, and other common services showed organised business activity rather than mere ownership exploitation. Income arising from property taken on lease, developed, and let as part of a business venture was therefore taxable as business income and not as income from house property.

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Issues: Whether the lease rentals and maintenance charges received from letting out a commercially developed complex taken on lease were assessable as business income or as income from house property.

Analysis: The assessee had taken vacant land on lease as a business venture, constructed a commercial complex from its own funds, and was obliged to surrender the leasehold improvements at the end of the lease term. The complex was exploited as a commercial asset by letting it to various occupants, and the assessee also provided substantial facilities such as watch and ward, maintenance, water supply, lift, generator, power, and other common services. The activity was held to be organised and commercial in character and not mere ownership exploitation. The reasoning applied the principle that where property is taken on lease, developed, and commercially exploited as part of the assessee's business activity, the income arising therefrom is business income.

Conclusion: The lease rentals and maintenance charges were held to be assessable as business income and not as income from house property.

Ratio Decidendi: Income from property taken on lease, developed as a commercial asset, and commercially exploited as part of a business venture is assessable as business income when the assessee is acting as a trader rather than as an owner.

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