Salami receipts from resettling own lands were not business income, as the company acted as a landowner, not a trader.

Salami receipts received by an incorporated landholding company from settlement and resettlement of its own lands were not business income where the lands and tenancy rights were not dealt with as stock-in-trade. The company's objects included acquisition, cultivation and leasing of property, but those objects were not conclusive. On the facts, it let its lands to tenants, collected rent, and acquired defaulting tenants' rights only through court auction so the land could be resettled. The receipts were treated as arising from ownership and enjoyment of property, not from trading in tenancy rights, and were therefore not chargeable as business income.

---

---

Issues: Whether salami receipts obtained by an incorporated company from settlement and resettlement of its lands, including receipts arising on auction-purchase of defaulting tenants' rights, constituted business income chargeable under the Indian Income-tax Act, 1922.

Analysis: The decisive inquiry was the real nature of the company's activities and whether the lands and tenancy rights were dealt with as the stock-in-trade of a trading business or as property held and enjoyed by a landowner. The company's objects permitted acquisition, cultivation, leasing and dealing with property, but those objects were not conclusive. On the facts, the company settled its own lands on tenants, collected annual rent, and in cases of default acquired back the tenancy rights only in respect of its own lands through court auction so that the land could be resettled. This was not trading in tenancy rights as a circulating asset. The receipts were therefore comparable to those of a landowner dealing with property, not profits arising from a business operation.

Conclusion: The salami receipts were not business income and were not chargeable as income from business.

---