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Issues involved: Determination of whether income from properties owned by the assessee should be treated as business income or income from house property for the assessment year 1985-86.
Summary: The High Court of Madras addressed the issue of whether the income from properties owned by the assessee should be classified as business income or income from house property for the assessment year 1985-86. The Tribunal had treated the income as business income, which was challenged by the Revenue. The court referred to a previous case involving the same assessee where it was held that if a property was used for business purposes, no notional income could be assessed. However, in the current case, none of the properties were used for business or housing the managing director. The court cited a Supreme Court case emphasizing that income falling under specific heads must be computed accordingly for taxation purposes. The court also discussed a case where income derived from letting out a plant was considered business income due to its connection with the assessee's normal business activities. The court clarified that the distinction between business income and income from house property is crucial and cannot be overlooked. Ultimately, the court found that the Tribunal erred in treating the rental income as business income and ruled in favor of the Revenue, awarding costs to them.
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