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Issues Involved:
Interpretation of income derived from letting out godowns to Food Corporation of India under the head 'Business' or 'Income from house property' for assessment year 1979-80. Judgment Summary: The reference under section 256(1) of the Income-tax Act, 1961 was made to the High Court for opinion on whether the income derived by the assessee from letting out godowns to Food Corporation of India should be assessed under the head 'Business' or 'Income from house property'. The assessee, a company, leased a plot of land and constructed godowns for letting to FCI on a monthly rental basis. The Income-tax Officer initially assessed the income under 'Income from house property' but later under 'Income from other sources' on direction from the Inspecting Assistant Commissioner (Assessment). The Commissioner of Income-tax (Appeals) upheld the assessment under 'Income from house property', stating that the assessee became the owner of the land and structure raised thereon. The Appellate Tribunal, however, held that the income was assessable under the head 'Business'. The Tribunal found that the assessee was a lessee of the land, constructed the godowns as per FCI's specifications, and was obligated to maintain the property as per the agreement terms. The High Court considered precedents like Karnani Properties Ltd. v. CIT and S. G. Mercantile Corporation P. Ltd. v. CIT to determine the nature of the income. Referring to East India Housing and Land Development Trust Ltd. v. CIT and Sultan Brothers Private Ltd. v. CIT, the Court emphasized that each case must be examined from a businessman's perspective to ascertain if the letting was a business activity or property exploitation. The Court concluded that the income in this case should be categorized as 'income from property' rather than 'business income', ruling in favor of the Revenue and against the assessee. As the assessee was not represented, no costs were awarded in the matter.
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