Business income treatment for sub-letting receipts where property exploitation formed part of the assessee's trading venture.

Income from sub-letting stalls in a leasehold market property was treated as business income where the assessee's acquisition, improvement and commercial exploitation of the premises formed part of its trading venture. The Act's residuary head applies only if income is not chargeable under a specific head, and the decisive enquiry was whether the property was held and let as an investment or as part of business activity. On the stated facts, the assessee acted as a trader in property rather than as a passive owner, so the receipts were assessable under the business head and not as income from other sources.

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Issues: Whether income from sub-letting stalls in a leasehold market property was assessable as business income under section 10 of the Indian Income-tax Act, 1922, or as income from other sources under section 12 of that Act.

Analysis: The relevant scheme of the Act distinguishes between specific heads of income and the residuary head. Section 12 applies only when income is not chargeable under a preceding specific head. The definition of business is of wide amplitude and may include dealing in property, but the decisive question is whether the acquisition of the property and its letting were part of the assessee's trading activity or merely an investment activity. The assessee was incorporated with objects that included acquiring, holding, leasing and commercially dealing with property. Shortly after incorporation it took the market on lease, undertook substantial improvements, and sub-let portions as shops, stalls and ground spaces. These facts showed that the lease and sub-letting formed part of its commercial venture and that it was acting as a trader and not merely exploiting property as an owner.

Conclusion: The income from sub-letting was assessable under section 10 as business income and not under section 12 as income from other sources, in favour of the assessee.

Ratio Decidendi: Where a lessee acquires property and sub-lets it as part of its essential commercial undertaking, the resulting receipts are business income and the residuary head cannot be invoked.

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