1985 (8) TMI 56 - HC - Income Tax

Summary

Issues:
- Interpretation of whether income from lease money is assessable under section 28 of the Income-tax Act as income from business or other sources.
- Determination of whether expenses claimed by the assessee can be allowed as incidental to business or incurred in earning the income.

Analysis:
The case involved an application under section 256(2) of the Income-tax Act, 1961, where the Commissioner of Income-tax, Rajasthan, sought a reference from the Income-tax Appellate Tribunal regarding the classification of income from lease money. The Income-tax Officer initially treated the income as from other sources, but the Appellate Assistant Commissioner reclassified it as business income, allowing expenses as incidental to business. The Tribunal upheld this decision, refusing to refer the matter on the basis that it was a factual finding. However, the High Court disagreed, stating that the nature of the income was indeed a question of law, leading to the reframing of the question for clarity.

The High Court emphasized that the determination of whether income from lease money constitutes business income or not is a question of law, not a mere question of fact. The court highlighted that the allowance of expenses claimed by the assessee hinges on the classification of the income, underscoring the significance of this classification in the context of tax assessment. By reframing the question posed to the Tribunal, the High Court aimed to ensure a clear understanding of the dispute and directed the Tribunal to refer the question for the court's opinion, indicating the importance of resolving this legal issue for proper tax assessment.

In conclusion, the judgment by the High Court of Rajasthan clarified that the classification of income from lease money as either business income or income from other sources is a legal question that impacts the allowance of expenses claimed by the assessee. By directing the Tribunal to refer the question for the court's opinion, the High Court underscored the need for a clear determination on this matter to ensure accurate tax assessment and compliance with the provisions of the Income-tax Act, 1961.