Rental income from property-letting business taxed as business income, with consistency in earlier years supporting the same treatment.

Rental receipts from properties held and let as the assessee's principal business activity were taxable as business income, because the character of the income followed the business object and operation of the assessee. Where letting out properties was itself the main business and the entire income arose from that activity, the house property head did not apply; the East India Housing principle was confined to cases where letting was incidental to another dominant object, while the Chennai Properties approach applied here. The consistent treatment of the same receipts as business income in earlier years was also followed, as no material change in facts was shown.

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Issues: (i) Whether rent income derived from leasing of properties, where leasing was the assessee's principal business activity under its memorandum of association, was taxable as income from house property or as business income; (ii) Whether the consistent treatment of such income as business income in several assessment years should be followed in the absence of any material change in facts.

Issue (i): Whether rent income derived from leasing of properties, where leasing was the assessee's principal business activity under its memorandum of association, was taxable as income from house property or as business income.

Analysis: The decisive factor is the nature of the assessee's activity and the character of the income source. Where the assessee's main object is to acquire and let out properties and the entire income arises from that activity, the income is attributable to the business carried on by the assessee. The position in East India Housing applies where letting is incidental to another dominant object, whereas Chennai Properties recognises that rental receipts form business income when letting out of properties itself is the business object and operation of the assessee.

Conclusion: The income from leasing of the properties was assessable as business income and not as income from house property, in favour of the assessee.

Issue (ii): Whether the consistent treatment of such income as business income in several assessment years should be followed in the absence of any material change in facts.

Analysis: The assessment history showed that for multiple years the department had treated the same rental receipts as business income. In tax matters, a settled position on a fundamental factual aspect should not be altered in later years without a material change justifying departure. No such change was shown.

Conclusion: The rule of consistency supported adoption of the same treatment, in favour of the assessee.

Final Conclusion: The Tribunal's view was set aside and the rental income from the assessee's property-letting activity was held to be taxable under the business head, with the appeals succeeding for the assessee.

Ratio Decidendi: Where the letting of properties is itself the assessee's main business activity, rental receipts are to be assessed as business income; absent a material change in facts, a consistently accepted tax treatment should not be disturbed in later years.

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