Commercial exploitation of property as a business asset led lease rentals to be taxed as business income.

Lease rentals from modules let out with infrastructural facilities in a software technology park were taxable as business income because the assessee's memorandum showed a main object of providing facilities for computer centres and related software activity. The modules were not passively let as bare property; they were constructed and exploited as part of the company's commercial business model. Applying the settled test that the character of letting income depends on the nature of the activity and the assessee's object, the receipts were treated as commercial exploitation of a business asset. The Revenue's appeals failed, and the Tribunal's view was affirmed.

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Issues: Whether the lease rentals derived from letting out modules with infrastructural facilities in a software technology park were assessable as business income or as income from house property or income from other sources.

Analysis: The assessee's memorandum showed that its main object was to establish and provide facilities and amenities required to run computer centres and related software activity, and its ancillary powers enabled acquisition, construction and development of buildings and land for that purpose. The modules were not let out as a mere passive property letting; they were constructed and exploited as part of the company's business object of providing infrastructure for IT companies. Applying the settled principle that the character of income from letting depends on the facts, the nature of the activity, and the object of the assessee, the rental receipts were held to arise from commercial exploitation of the property as a business asset.

Conclusion: The lease rentals were assessable as business income and not as income from house property or income from other sources.

Final Conclusion: The Revenue's appeals failed, and the Tribunal's view treating the receipts as business income was affirmed.

Ratio Decidendi: Where letting of property with infrastructure is undertaken in furtherance of the assessee's main business object and amounts to commercial exploitation of the asset, the resulting receipts are taxable as business income.

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