Rental income from property classified as house property, not business income. Intention key.

The Tribunal held that the rental income derived from immovable properties should be categorized as income from house property, not business income. Despite the assessee being engaged in both tobacco business and property rental, the Tribunal emphasized that the nature of rental income depends on the intention at the time of letting out the property. It found no evidence to support treating the rental income as business income and distinguished the case from precedents where additional amenities were provided to tenants. Consequently, the Tribunal set aside the CIT(A)'s decision and reinstated the assessing officer's classification, ruling in favor of the revenue.

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Issues:
1. Whether rental receipts on buildings should be treated as income from business or income from house property.

Analysis:
The appeals were filed by the revenue against the CIT(A)'s orders, arguing that the rental receipts on buildings should be considered income from house property, not business income as assessed by the assessing officer. The assessee derived income from letting out properties and tobacco business. The assessing officer concluded that the rental income is from house property, while only income from tobacco sales and commission should be considered business income. The CIT(A) allowed relief to the assessee, considering the rental income as business income based on various judicial precedents, including the Supreme Court's ruling in Sultan Bros (P) Ltd. vs. CIT 51 ITR 353.

The revenue contended before the Tribunal that since each property was let out to a single tenant for a considerable period, the rental income should be categorized as income from house property. They relied on judgments like Shambhu Investment (P) Ltd. vs. CIT 263 ITR 143 (SC) and a Calcutta High Court case. The Tribunal analyzed the facts and noted that the assessee was engaged in both tobacco business and letting out properties. Referring to the Shambu Investment case, the Tribunal emphasized that the nature of rental income from house property should be determined by the intention of the assessee at the time of letting out the property.

The Tribunal found that the rental income derived from the immovable properties by the assessee was indeed income from house property. It highlighted that there was no evidence to suggest that letting out the properties was a business activity or that the commercial assets were exploited temporarily. The Tribunal distinguished the case from Shambhu Investment, where the assessee provided additional amenities to tenants. The Tribunal disagreed with the CIT(A)'s decision, stating that it did not consider the apex court's judgment in Shambhu Investment, which was available at the time of the CIT(A)'s order. Therefore, the Tribunal set aside the CIT(A)'s order and reinstated the assessing officer's decision, allowing the revenue's appeals.

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