2003 (1) TMI 52 - HC - Income Tax

The substantial question of law arising out of the Tribunal s order is-whether the income derived by the assessee from letting out of the house property should be assessed under the head Income from house property under section 22 or Income from business under section 28 of the Act. We set aside the order of the Tribunal. The appeals are allowed.

Summary

Issues:
Assessment of income from letting out house property under "Income from house property" or "Income from business"

Analysis:
The case involved a dispute regarding the assessment of income derived from letting out a commercial complex under the Income-tax Act, 1961. The primary issue was whether the income should be assessed under the head "Income from house property" or "Income from business." The assessee, a private limited company, had acquired leasehold rights to land and constructed a commercial complex on it, earning income from rentals. The Commissioner of Income-tax initiated revisional proceedings under section 263, contending that the income should be assessed under the head "Income from house property." The Tribunal, however, ruled in favor of the assessee, determining that the income should be treated as income from business due to the leasehold nature of the land.

The Tribunal's decision was challenged before the High Court, which referred to the Supreme Court's ruling in CIT v. Podar Cement (P.) Ltd. The Supreme Court had clarified that for the purposes of section 22 of the Income-tax Act, the term "owner" should be interpreted as a person entitled to receive income from the property in their own right. Applying this interpretation to the present case, where the assessee had constructed the commercial complex and earned rental income directly, the High Court concluded that the assessee should be considered the owner of the property. Therefore, the income had to be assessed under the head "Income from house property."

The High Court also addressed the arguments based on previous judgments, such as S.G. Mercantile Corporation (P.) Ltd. v. CIT and Balaji Enterprises v. CIT. It noted that these judgments did not directly apply to the current case and that the interpretation of the term "owner" as per the Supreme Court's ruling in Podar Cement (P.) Ltd. was the determining factor. Consequently, the High Court set aside the Tribunal's order and allowed the appeals, affirming that the income derived from the commercial complex should be assessed under the head "Income from house property."