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Issues involved: Determination of whether the income of the assessee should be assessed under the head 'Income from business' or 'Income from property'.
Summary: The High Court of Rajasthan addressed the issue of assessing the income of M/s. Hotel Ratanada International Pvt. Ltd. under the appropriate head for the assessment years 1981-82 and 1982-83. The company's memorandum of association included conducting business related to various properties. The Assessing Officer initially categorized the rental income under "Income from property" disallowing depreciation. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Income-tax Appellate Tribunal ruled in favor of assessing the income under "Income from business" based on the company's memorandum of association. The High Court referred to legal precedents emphasizing the exclusive nature of income heads under the Income-tax Act. It cited the case of East India Housing and Land Development Trust Ltd. v. CIT, highlighting that income falling under a specific head must be computed accordingly. Additionally, it referenced the Supreme Court's decisions in Universal Plast Ltd. and Guntur Merchants Cotton Press Co. Ltd., which outlined factors for determining whether income from leasing assets constitutes business income. Ultimately, the High Court concluded that the rental income received by the assessee should be assessed under "Income from property" as the hotel construction was incomplete, and no business operations had commenced. It emphasized that the company's memorandum of association did not justify categorizing the income as business income. The court directed each party to bear their own costs due to the assessee's absence during the proceedings.
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