1965 (12) TMI 43 - SC - Income Tax

Whether, on the facts and circumstances of the case, the rental income from the house property received by the assessee for the assessment years 1950-51 and 1951-52 is not exempt under section 4(3)(xii) of the Act not withstanding section 10(7) of the Act ? Held that - It is equally impossible to apply the provisions of section 4(3)(xii) to an assessment made under section 10(7), read with paragraph 6 of the Schedule. There is no income chargeable under the head Income from property as far as a general insurance business is concerned. The effect of section 10(7) is to delete the heads Interest on securities , Income from property and Income from other sources from section 6 of the Act, as far as general insurance businesses are concerned. Thu agree with the High Court that the answer to the question must be in the affirmative and against the assessee. Appeal dismissed.

Summary

Issues:
Interpretation of section 4(3)(xii) and section 10(7) of the Indian Income-tax Act, 1922 in relation to rental income from property received by an insurance company.

Analysis:
The case involved a dispute regarding the assessment of rental income from a property owned by an insurance company. The main question was whether the rental income was exempt under section 4(3)(xii) of the Act, despite the provisions of section 10(7) which govern the computation of profits and gains for insurance businesses.

The appellant, an insurance company, received rental income from a property it owned, part of which was used for its business while the rest was let out. The Income-tax Officer initially excluded this rental income from assessment under section 4(3)(xii). However, the Commissioner of Income-tax sought to modify this decision, arguing that the exemption under section 4(3)(xii) applied only to income chargeable under the head 'income from property', not income from insurance business.

The Income-tax Appellate Tribunal upheld the Commissioner's decision, stating that the exemption under section 4(3)(xii) applied to income received from property specifically, and not to income from insurance business. The High Court also ruled against the appellant, holding that the rental income was not exempt under section 4(3)(xii).

The appellant argued that section 4(3)(xii) should apply to exempt the rental income, as it was chargeable under the head 'income from property', despite the special assessment basis for insurance companies under section 10(7). The appellant contended that the non-obstante clause in section 10(7) did not override the exemption provided in section 4(3)(xii).

In analyzing similar cases, the court highlighted that insurance companies are assessed on a special basis, with different rules for life insurance and general insurance businesses. The court emphasized that the special assessment basis for insurance companies does not align with the provisions of section 4(3)(xii) regarding income from property.

Referring to precedents and legal interpretations, the court concluded that the rental income from property received by the insurance company was not exempt under section 4(3)(xii) due to the specific assessment rules governing insurance businesses under section 10(7) and the Schedule to the Act. The court affirmed the decision of the High Court, dismissing the appeals and awarding costs against the appellant.