TaxTMI 
TaxTMI 
2020 (2) TMI 213
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....roperties and Investment Pvt. Ltd. [(2004) 266 ITR 685], which judgment came to be reversed by the Hon'ble Supreme Court later on in the appeal filed by M/s. Chennai Properties and Investment Pvt. Ltd. v. CIT [(2015) 373 ITR 673 (SC)]. 3. The facts in brief of both the Assessees are as under: M/s. CeeDeeYes IT Parks Pvt. Ltd. - As per the Assessment Order passed in the said case, the Assessee company was incorporated to carry out the business of providing infrastructure amenities, work space for IT companies and constructed the property in question and let it to one such IT company M/s. Cognizant Technology Solutions India Ltd. The Assessee claimed the rental income to be taxable as its 'Business Income' and not as 'Income from House Property', but the Assessing Authority as well as the Appellate Authorities held against the Assessee and held such income to be income from house property. 4. M/s. PSTS Heavy Lfit and Shift Limited - For the Assessment Year 1999-2000, the Assessing Authority held that the Assessee owned two warehouses situate near SIPCOT Tuticorin with total land area of 3.09 Acres and built up area of each approximately 32000 sq.ft. The Assesse....
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.... expenses could be allowed against such income, but the Assessing Authorities below, in order to deny such deductions or depreciation and other expenditure incurred by the Assessee to earn such business income, deliberately held that such rental income was taxable under the head 'Income from House Property', so that the only limited deductions under that Head of 'Income from House Property' could be allowed to the Assessee and a higher taxable income can be brought to tax under the provisions of the Act. 7. In support of his contentions, he relied upon the following case laws: (a) Chennai Properties Investments Limited v. Commissioner of Income Tax [(2015) 373 ITR 673 (SC)]; (b) Rayala Corporation Private Limited v. Assistant Commissioner of Income Tax [(2013) 386 ITR 500 (SC)]; and (c) Raj Dadarkar & Associates v. Assistant Commissioner of Income Tax [(2017) 394 ITR 592 (SC)]. 8. Per contra, the learned counsel for the Revenue Mr.Ravikumar, supported the orders passed by the learned authorities below, as also the Income Tax Appellate Tribunal and placing reliance upon the earlier judgments of Madras High Court as well as the old judgments under the old Inco....
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....early held that where the assessee is a company whose main object of business is to acquire properties and to let out those properties, the rental income received therefrom was taxable as 'income from business' and not 'income from house property', following the ratio of the Constitution Bench judgment of the Supreme Court in Sultans Brothers (P) Ltd. v. Commissioner of Income Tax [(1964) 51 ITR 353 (SC)], wherein it was held that each case has to be looked at from business man's point of view to find out whether the letting was doing of a business or the exploitation of the propert by owner. 13. The relevant portion of the decision of the Supreme Court in the case of Chennai Properties (supra) is quoted below for ready reference, in which the Hon'ble Supreme Court also relied upon its earlier decision in Karanpura Development Co. Ltd. v. Commissioner of Income Tax [44 ITR 362 (SC)], are quoted below for ready reference: "Before we refer to the Constitution Bench judgment in the case of Sultan Brothers (P) Ltd., we would be well advised to discuss the law laid down authoritatively and succinctly by this Court in 'Karanpura Development Co. Ltd. v. Comm....
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....inciple to the facts, which were there before the Court, it came to the conclusion that income had to be treated as income from business and not as income from house property. We are of the opinion that the aforesaid judgment in Karanpura Development Co. Ltd.'s case squarely applies to the facts of the present case. No doubt in Sultan Brothers (P) Ltd.'s case, Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. This is so stated in the following words: - "We think each case has to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. T....
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....arn rent and therefore, the income so earned should be treated as its business income. 12. In view of the law laid down by this Court in the case of Chennai Properties (supra) and looking at the facts of these appeals, in our opinion, the High court was not correct while deciding that the income of the assessee should be treated as Income from House Property." (emphasis supplied) 15. Similarly, in Raj Dadarkar & Associates v. Assistant Commissioner of Income Tax [(2017) 394 ITR 592 (SC)], the same position was re-iterated in the following manner: "14) There may be instances where a particular income may appear to fall in more than one head. These kind of cases of overlapping have frequently arisen under the two heads with which we are concerned in the instant case as well, namely, income from the house property on the one hand and profits and gains from business on the other hand. On the facts of a particular case, income has to be either treated as income from the house property or as the business income. Tests which are to be applied for determining the real nature of income are laid down in judicial decisions, on the interpretation of the provisions of these two heads. Wh....
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.... 17. We are of the clear opinion that once the property in question is used as business asset and the exclusive business of the assessee company or firm is to earn income by way of rental or lease money, then such rental income can be treated only as the 'Business Income of the Assessee' and not as 'Income from House Property'. The Heads of Income is divided in various six heads, including 'Income from House Property', which defines the specific source of earning such incomes. The income from house property is intended to be taxed under that head mainly if such income is earned out of idle property, which could earn the rental income by user thereof from the lessees. But, where the income from the same property in the form of lease rentals is the main source of business of the Assessee, which has its business exclusively or substantially in the form of earning of the rentals only from the Business Assets in the form of such landed properties, then, in our opinion, the more appropriate Head of Income applicable in such cases would be 'Income from Business'. 18. A bare perusal of the Scheme of the Income Tax Act, 1961, would reveal that while comput....