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Issues involved: Determination of whether the assessee's income from letting of warehouses should be assessed under the head 'income from business' or 'income from house property'.
Summary: Issue 1: Classification of income The Revenue appealed against the classification of the assessee's income from letting of warehouses as 'income from business' instead of 'income from house property'. The Tribunal noted that the main objects of the company were related to earning business profits through warehousing activities. The profit and loss account indicated that the primary source of income for the assessee was storage charges and maintenance/user charges. The Tribunal observed that the income from letting out warehouses and godowns was rightly classified as 'Business Income' based on the company's objectives and financial activities. Issue 2: Legal precedents The Revenue's argument, citing judgments of the Madras High Court, emphasized that rental income from leased buildings should be assessed as 'Income from House Property'. However, the Tribunal differentiated the present case from the cases relied upon by the Revenue. It referenced a judgment of the Bombay High Court, which highlighted that the primary intention of the assessee in exploiting the property determines the classification of income. In this case, the Tribunal found that the dominant aspect of the transaction was the business of warehousing, leading to the conclusion that the income should be treated as 'Business Income'. Conclusion: Considering the previous Tribunal decision in the assessee's favor and the alignment of facts in the current case, the Tribunal upheld the classification of the assessee's income from letting of warehouses as 'Business Income'. Consequently, the Revenue's appeal was dismissed, affirming the findings of the CIT(A). This judgment highlights the importance of assessing the primary intention behind income generation to determine its appropriate classification under the Income Tax Act.
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