2008 (10) TMI 371 - HC - Income Tax

Income from business or property - rental income from warehouses - derived by the appellant from procurement of wheat and paddy as agent of Food Corporation of India/Government is exempt under sec-tion 10(29) of the Act - common expenses incurred by the appellant - Held that - letting out of premises and of rent was a part of business, the income will be business income - In present case the income is business income - appeal is dismissed

Summary

Issues:
1. Exemption of income derived from procurement of wheat and paddy under section 10(29) of the Income-tax Act.
2. Apportionment of common expenses towards taxable and non-taxable income.
3. Computation of income from rent of warehouses under the head 'Income from house property' despite being derived in the course of business.

Analysis:

Issue 1:
The assessee, a warehousing corporation, appealed against the disallowance of exemption claimed under section 10(29) for income from procurement of wheat and paddy. The High Court rejected the claim, stating that the exemption was limited to income from letting of godowns. The Tribunal remanded the matter for apportionment of expenses. The Revenue cited precedents where similar issues were decided against the assessee, leading to the dismissal of this issue.

Issue 2:
Regarding the apportionment of expenses, the matter was remitted back to the Assessing Officer. The High Court held that this issue did not constitute a substantial question of law, as it was a procedural matter to be determined by the Assessing Officer.

Issue 3:
The Tribunal determined that income from providing storage facilities to the Food Corporation of India (FCI) constituted business income, not income from house property. The High Court concurred, emphasizing that the assessee's main business was providing storage facilities, making the income fall under the head of business. Precedents were cited to support this conclusion, including the test of whether income directly falls under one head. The judgment of the Madras High Court in a similar case was distinguished, and the appeal was dismissed based on the established legal principles.

In conclusion, the High Court dismissed the appeal, upholding the decisions on all three issues based on legal precedents and the nature of the assessee's business activities.