Commercial letting as business activity makes rental receipts taxable as business income, not house property income.

Rental receipts from warehouses or other properties are assessable as business income where the real nature of the assessee's activity shows that letting is itself the business, or the properties are exploited as commercial assets in the course of that business. Classification turns on the object and manner of exploitation, not mere ownership, and the income-tax heads are not watertight compartments. The court followed the settled Supreme Court principle and rejected a contrary view based on a reversed decision. The rental income in both matters was therefore taxable as business income, not as income from house property.

---

---

Issues: Whether rental income from letting out warehouses or other properties used as business assets is taxable as income from business or as income from house property.

Analysis: The governing test is the real nature of the assessee's activity and the object and manner of its business, not merely ownership of the property. Where letting of properties is itself the business of the assessee, or where the property is exploited as a commercial asset in the course of the assessee's business, the rental receipts are assessable as business income. The scheme of the Income-tax Act, 1961 also shows that the heads of income are not watertight compartments, and the classification depends on whether the property is an idle source of rent or the very business of the assessee. The earlier contrary view based on the reversed High Court decision could not prevail against the settled law declared by the Supreme Court.

Conclusion: The rental income in both matters was taxable as business income and not as income from house property.

Ratio Decidendi: Where the assessee's main or exclusive business is to let out properties as commercial assets, the receipts from such letting are assessable under the head of business income rather than under the head of income from house property.

---