Business income treatment of hotel and property rentals allowed related deductions and consequential interest relief.

Rental receipts from the assessee's building and hotel were treated as business income where the memorandum authorised hotel and property-related activities and the relevant year's facts showed construction of a hotel building with rent derived from parts of the same premises. The earlier assessment year did not govern the later year because each year must be decided on its own facts. On that basis, the receipts were characterised as part of the assessee's business activity, so the related business deductions were allowable and the consequential interest liability under sections 139(8) and 217 followed the same treatment.

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Issues: Whether rental income derived from the assessee's building and hotel was assessable as business income or income from property, and whether the business-related deductions and consequential interest liability were to be allowed.

Analysis: The assessee's memorandum of association authorised it to carry on hotel and property-related business, and the facts for the relevant year showed construction of a hotel building together with receipt of rent from parts of the same premises. The earlier assessment for another year did not control the present year, as each assessment year has to be decided on its own facts. On the overall material, the rental receipts were held to be part of the assessee's business activity. Once the receipts were treated as business income, the expenses claimed for carrying on that business became allowable, and the interest charge under section 139(8) and section 217 followed consequentially.

Conclusion: The rental income was assessable as income from business and not as income from property, and the assessee was entitled to the related deductions and consequential relief.

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