2003 (3) TMI 28

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....fficer declined to assess that rental income under the head 'Income from business' and assessed the same under the head 'Income from property'. The Commissioner having allowed the assessee's appeal, the Revenue carried the matter to the Appellate Tribunal which has confirmed the view of the Commissioner. The main objects of the assessee-company which was registered on May 24,1974, with a capital of Rs. 1,00,000 are as under: "(1) To purchase or otherwise acquire and hold the properties known as 'Chennai House', at Esplanade, Madras and 'Firhaven Estate' at South Beach Road, Madras, and lands, buildings and other property of any tenure and any interest therein, and to let out such properties and to make advances upon the security of lands or buildings or other property, or any interest therein. (2) To buy, sell, underwrite, invest in, exchange or otherwise acquire, and to hold, manage, develop, deal with and turn to account any bonds, stocks, obligations or securities of British, Foreign or Colonial Governments, states, dominions, sovereigns, provinces, municipalities, or ruling or public authorities, or the bonds, debentures, debenture stocks, scrips, obligations, shares, ....

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....ble as business income or income from property, or income from other sources more specifically under sub-section (4) of section 12 of the Indian Income-tax Act, 1922, which dealt with composite income in the case of letting out of furniture with building. The court held that lease was a composite one and therefore, income so collected was to be dealt with under section 12(4). While so holding the court observed that: "Because of the composite character of the income it becomes a new kind of income, not covered by section 9, i.e., income not from the ownership of the building alone, but, income which though arising from a building would not have been arising if the plant and machinery and furniture had not also been let along with it." Prior to the decision of the Constitution Bench, but, subsequent to the decision in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49, a three-judge Bench of the court in the case of Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 considered the case of an assessee which held a mining lease for coal and received rental income from sub-lessees to whom portions of the leased area had been sub-leased. The principal ....

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.... from business. The law laid down in the case of Karnani Properties [1971] 82 ITR 547 (SC), thus, was that rent derived from letting would be assessable as income from property. That decision is clearly in accordance with the decision of the Constitution Bench in the case of Sultan Brothers [1964] 51 ITR 353 (SC) which had approved the decision of the three-judge Bench in the case of East India Housing and Land Development Trust Ltd. [1961] 42 ITR 49 (SC). S.G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 (SC) was a case of an assessee-company which had obtained a market place on lease and sublet portions of the same to different tenants, decided by a four-judge Bench. The court did not regard the law laid down in East India Housing and Land Development Trust Ltd. [1961] 42 ITR 49 (SC) as being applicable to the case of the assessee before it in that case, who was a tenant and not the owner. The observations made in that decision, therefore, are not to be regarded as having laid down the law with regard to the manner in which the rental income derived by the owner from letting out of the building owned by it is to be treated whether as income from business, or inco....

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....g houses was to be assessed as business income. It was held that running of lodging house, on the facts of that case was not as owner of the property. In the case of Anaikar Traders and Estates (P.) Ltd. (No.1) v. CIT [1990] 186 ITR 175 this court, after referring to the decisions of the apex court in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC) as also the case of CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 and United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 held that the income derived from the letting out of buildings owned by the assessee whose object was acquisition and possession of property with the incidental object of selling or leasing the same was not income from business but income from property. Similar view has been taken by this court, in the case of CIT v. Smt. P. Andal Ammal [2000] 243 ITR 715 (Mad); Indian Overseas Bank Ltd. v. CIT [2000] 246 ITR 206 (Mad) and CIT v. Indian Warehousing Industries Ltd. [2002] 258 ITR 93 (Mad). Learned counsel for the Revenue invited our attention to two decisions one rendered by the Andhra Pradesh High Court and another by the Kerala High Court. In the case of CIT v. George O....

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....bit of section 22. Though it is not clear from the context as to why the Act describes income from property as income from house property, the substantive provision of law which creates the charge and obligates the person who receives such income to have it assessed under that head does not confine its application only to house property, but extends to all buildings whether such building is used as dwelling house or for other purposes. It has been held by the Supreme Court uniformly in all cases where the issue was the head under which the rental income from buildings is to be assessed, that such income is to be assessed under the head "Income from properties/income from house properties". The earliest of these decisions is in the case of East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49, which received the approval of the Constitution Bench in the case of Sultan Brothers Pvt. Ltd. v. CIT [1964] 51 ITR 353. Though the decision rendered by the Bench in the case of S.G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700, appears to strike a different note, the judgment itself clarifies that the law declared in East India Housing [1961] 42 ITR 49 (S....