2014 (11) TMI 1214 - HC - Income Tax

Correct head of income - Rental income from letting out of warehouses/godowns - business income or income from house property - HELD THAT - As decided in own case 2014 (11) TMI 895 - GUJARAT HIGH COURT Rental income from letting out of warehouses/godowns together with various services rendered to the occupant did not constitute a business activity of the appellant and as such the income arising therefrom was not assessable under sec. 28 of the Income-tax Act, 1961 as business income. We, therefore, answer the questions raised in the present appeal in the affirmative - Decided in favour of the revenue and against the assessee.

Summary

Issues:
Interpretation of rental income from letting out warehouses/godowns as business income or income from house property.

Analysis:
The appellant, a partnership firm, primarily engaged in letting out warehouses/godowns for storage, claimed the rental income as business income. However, the assessment officer considered it as 'income from house property.' The CIT (Appeals) later held it as assessable business income. On appeal, the ITAT ruled that the rental income should be taxed as income from house property. The main contention was whether the income from letting out warehouses/godowns constitutes business income or income from house property.

The appellant's advocate argued that the rental income is incidental to the business and should be assessed under 'business income,' citing precedents where similar income was considered business income. The revenue's advocate supported the ITAT's decision, emphasizing that the facilities provided were incidental to the main activity of letting out godowns for storage.

The High Court reviewed previous decisions in the appellant's case and upheld the ITAT's decision. It was established that the income derived from letting out warehouses/godowns, along with additional services provided, did not qualify as a business activity under sec. 28 of the Income-tax Act, 1961. The Court emphasized that the income was earned through an adventure in the nature of trade, not merely as an owner of the asset, leading to the conclusion that the income was not assessable as business income but as income from house property. The Court affirmed the Tribunal's decision, dismissing the appeal and upholding the impugned order.

In conclusion, the High Court affirmed that the rental income from letting out warehouses/godowns, along with services rendered, did not constitute a business activity and should be taxed as income from house property. The judgment favored the revenue and rejected the appellant's claim for assessing the income under business income.