Property income classification prevails where a discontinued business asset is let out and rental arises from ownership alone.

Rent from a studio building was assessable as income from property, not as business income, because the film-production business had been discontinued, the machinery used in that business had been sold, and the building was let out as a cotton godown. The heads of income are mutually exclusive, so a receipt falling specifically under the property head cannot be shifted to business income merely because the company's objects permitted letting of assets or because an earlier assessment had treated similar receipts differently. The decisive test was whether the letting represented exploitation of property as owner rather than use in an ongoing business; on these facts, the income arose only from ownership of the building.

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Issues: Whether the rent received from letting out the studio building was assessable as business income or as income from property.

Analysis: The studio had ceased to be used for film production, the machinery used for that business had been sold, and the building was let out as a cotton godown. The classification of income under the income-tax heads is mutually exclusive, and where a receipt falls specifically under the head relating to property, it cannot be shifted to business income merely because the company's objects authorised letting of its assets or because an earlier assessment had treated similar receipts differently. The decisive consideration was whether the letting was exploitation of property as owner or a use in the course of an existing business; on the facts, the original film-production business had been discontinued and the rental arose only from ownership of the building.

Conclusion: The rent from the studio building was assessable as income from property and not as profits and gains of business.

Final Conclusion: The reference was answered against the assessee, holding that the rental receipts from the studio building fell under the property head and were not taxable as business income.

Ratio Decidendi: A receipt derived from ownership and letting of property must be taxed under the specific head of income from property when the underlying business using that asset has been discontinued, and it cannot be reclassified as business income merely because the assessee is a company or had earlier been allowed a different treatment.

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