1993 (8) TMI 40 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the interpretation and application of section 22 of the Income-tax Act, 1961 in relation to the classification of rental income from a residential building as either business income or income from house property.

Question 1:
The first question raised was whether the income from a building, which was constructed as an essential part of the assessee's business, should be assessable as business income. The court examined whether the rental income from the residential building should be classified as income from house property or business income.

Question 2:
The second question inquired whether the assessee's claim for depreciation on the building was rightfully rejected by the Tribunal. This involved determining if the residential building, for which depreciation was claimed, was used for the business of the assessee.

The judgment delves into the facts where the assessee acquired a plot of land for constructing a cinema theatre and residential buildings. The court analyzed the provisions of section 22 of the Income-tax Act, 1961, which govern the classification of income from property. It was established that the residential building in question was not utilized for the assessee's business activities but was rented out to tenants. The court rejected the argument that the residential building's construction was solely to facilitate the cinema theatre's construction, emphasizing that the income from the building falls under the category of "Income from house property" as per the Act. The judgment cited precedents to support the classification of rental income based on the specific provisions of the Income-tax Act, concluding that the Tribunal's decision to classify the income as from house property was appropriate. Consequently, the claim for depreciation on the residential building was also dismissed as it was not used for the business of the assessee.

The court answered both questions in favor of the Revenue, affirming the classification of the rental income as income from house property and denying the allowance of depreciation on the building. No costs were awarded, and the issuance of a certified copy was expedited.