2005 (1) TMI 36 - HC - Income Tax

Rental income from the property - Whether Tribunal was right in law in holding that the rent receipts derived by the assessee-company from letting out of properties should be assessed under the head Business thereby allowing the expenses incurred for letting out of properties as business expenditure? - held that the income derived from letting out the property should be assessed as income from the house property and not under the head Business - we answer the question of law referred to us in the negative in favour of the Revenue and against the assessee.

Summary

Issues:
Assessment of rental income under the head 'Business' or 'House property' for the assessment year 1987-88.

Analysis:
The High Court of Madras considered a case where the Income-tax Appellate Tribunal referred a question of law regarding the assessment of rental income derived by an assessee-company from letting out properties. The Tribunal assessed the income under the head 'Business', allowing expenses incurred for letting out properties as business expenditure. The assessee objected to the initial assessment under the head 'House property'. The Commissioner of Income-tax (Appeals) allowed the appeal, assessing the income under the head 'Business'. However, the High Court noted that in a previous case, it was held that income from letting out property should be assessed as income from 'house property' and not under 'Business'. The High Court concluded that the Tribunal was incorrect in assessing the rental income under the head 'Business' for the assessment year 1987-88, as the factual situation remained the same as in earlier assessment years. Therefore, the court answered the question of law in the negative, in favor of the Revenue and against the assessee, with no costs.

The court also addressed the issue of a pending appeal before the Supreme Court against a previous judgment that was followed in the current case. The counsel for the assessee sought oral leave for the grant of a certificate for leave to appeal to the Supreme Court. The court noted that the Supreme Court had already granted special leave to appeal against the judgment cited in the case. Considering that the points raised in the tax case are likely to recur in subsequent assessment years, the court granted the necessary leave to appeal to the Supreme Court of India and certified the case as a fit one for appeal to the Supreme Court of India.