AI Drafter 
TaxTMI 
TaxTMI 
1965 (2) TMI 117
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....er to the first question is in the affirmative, whether the income from letting out of the rooms to customers was to be separately computed and assessed under section 9?" So far as the first question is concerned, it is not happily worded and, therefore, we have recast this question as follows: "Whether, on the facts and circumstances of the case, the rooms were used for purpose of business and income arising therefrom is assessable under section 10?" It is common ground that if the first question is answered against the assessee, the second must also be so answered. The assessee is an individual and the matter in dispute relates to three assessment years 1954-55, 1955-56 and 1956-57. The assessee had purchased a piece of ....
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....Act. The Income-tax Officer, however, negatived this contention and held the income as "income from business" and, therefore, liable to assessment under section 10 of the Indian Income- tax Act, 1922 (hereinafter referred to as the Act). On appeal by the assessee, the Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. The assessee moved the Tribunal in further appeal and his appeal has been dismissed by the Tribunal. The Tribunal, while dismissing the appeal, found the following facts: "(i) The past history of Shri Manohar Singh showed that he is an expert in this line of business, viz., catering and looking after the persons who come and stay in this type of guest houses. (ii) The past recor....
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....transactions involved some risk, which was a sine qua non of business activities. The assessee did not sink his capital in property and derive income from rent from permanent tenants and was not a rentier. The assessee's income depended upon the reputation, goodwill and efficiency of service, which was the characteristic of this type of business." The assessee was dissatisfied with the order of the Tribunal, and, therefore, applied under section 66(1) of the Act to the Tribunal to refer to this court the question of law arising out of the order of the Tribunal. The Tribunal allowed the application and, after drawing up a statement of the case, has referred the two questions of law, already set out above, for the decision of this cour....
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.... 10 on the ground that the business of the assessee was to exploit property and earn income or because the income was obtained by a trading concern in the course of its business. 5. House-owning, however profitable, cannot be a business or trade under the Income-tax Act. Where income is derived from house property by the exercise of property rights properly so called, the income falls under the head 'income from property' chargeable under section 9. It is the nature of the operations and not the capacity of the owner that must determine whether the income is from property or from trade. Where the operations involved in the activity of earning income from house property are not different from those of an ordinary house-owner....
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....letting is only incidental and subservient to the main business of the assessee, the income derived from the letting will not be the income from property falling under section 9 and the exception to section 9 may also come into operation in such cases." It will also be profitable to refer to the decision of the Supreme Court in East India Housing and Land Development Trust Ltd. v. Commissioner of Income-tax [1961] 42 I.T.R. 49, 51 (S.C.). In this case, the contention was that the rental income of the assessee-company from certain buildings was "income from business" and not "income from property", because the assessee-company had been formed with the object of promoting and developing markets. The income that the company derived was from....
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.... the decision in Fry v. Salisbury House Estates Company Limited [1930] A.C. 432 in arriving at the aforesaid conclusion. This is the very case on which the learned counsel for the assessee places his reliance for his contention that the rental income of the rooms in question is "income from property" and thus assessable only under section 9 of the Act. It may be that the assessee's income, in common parlance, can be said to arise partly from the rental of property and partly from the business of running a paying guest establishment, i.e., business. But for the purposes of income-tax, the correct approach is to find out which is the specific head under which the said income falls. The said income may indirectly be covered by another h....