TaxTMI 
TaxTMI 
TaxTMI 
1985 (3) TMI 113
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....e-tax Act, 1961 ('the Act'), because the source of the income is ownership. The firm has invested money in the construction of godowns and the assessee-firm had exploited its property and earned income therefrom. Thus, the income is earned by letting out the property. So long as the source of income is the ownership of property, the character of income is income from house property only. Thus, the income received from the godowns is income from property and taxable under section 22. The assessee appealed to the Commissioner (Appeals). He upheld the action of the ITO holding that the income from the godowns is assessable as income from house property and not as income from business. Against the said order, the assessee has preferred these appeals. The ITO had refused to grant registration but the Commissioner (Appeals) has allowed the registration. We are not concerned with the registration of the firm in these appeals. 3. The learned counsel for the assessee urged that the very object of the firm was to construct godowns as per the specifications and plans of the FCI to suit their requirements and to lease them out to them. This is clear as per clause (3) of the partnership deed. ....
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....e profits of which are chargeable to income-tax. The above provision makes it very clear that if the house property is not used for the business of the assessee, then the annual value of that building of which the assessee is the owner is assessable under the head 'Income from house property'. The income received by the assessee from the godown of which he is the owner is clearly assessable under the above provision as income from house property. The contention of the assessee is that the very object and activity of the assessee-firm is to construct godowns as per the specifications and plans of the FCI to suit their requirements and lease them out to them and it is a business activity and as such, the income from the godowns is assessable as business income only. We are unable to accept this submission. (2) It is, no doubt, true that the firm has been constituted with the object of constructing godowns as per the specifications of the FCI and to lease them out to them. That by itself will not make the activity a business activity, if the income is derived by the assessee on account of its being the owner of the building. There is no dispute that the assessee is the owner of the go....
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.... landed properties and promoting and setting up markets thereon. The income derived by such a company from the tenants of the shops and stalls constructed on the land for the purpose of setting up market would not be taxed as business income under section 10 of the 1922 Act, but under section 9. In this case, the assessee was a lessee and not the owner of the property. Hence, it was held that the income was assessable under section 10. In Commercial Properties Ltd. v. CIT AIR 1928 Cal. 456, the Calcutta High Court held that the income derived from rent by the company whose sole object was to acquire lands, build houses and let them to tenants and whose sole business was the management and collection of rent from the said properties, was assessable under section 9 and not under section 10. It was observed in that case that merely because the owner of the property was a company incorporated with the object of owning the property, the incidence of income derived from the property owned could not be regarded as altered ; the income came directly and specifically under the head 'Income from house property' than income from business. In Ballygunge Bank Ltd. v. CIT [1946] 14 ITR 409 (Cal.....
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....ived from the property falls under the specific head, it is assessable under that particular head. The rental income derived by the owner of a building is assessable as income from property. If the assessee was not the owner but only a lessee of the property, then the rental income is not assessable as income from house property. 7. The ratio laid down in the above cases squarely applies to the instant case. In the instant case, the assessee is the owner of the godowns which are let out and so the rental income is assessable as income from house property. The fact that the firm was constituted with the object of constructing godowns as per the specifications of the FCI for being let out to them will not alter the character of the income as the assessee is the owner of the godowns and the rental income is assessable only as income from house property. We have gone through the lease agreement executed by the assessee with the FCI. The so-called services mentioned in clause (3) of that agreement are only for providing electricity, water supply, inner approach roads, fencing, etc., which are the basic amenities required to be provided for a godown. Hence, they cannot be called as any ....