1982 (7) TMI 108 - AT - Income Tax

Summary

Issues:
Assessment of income from industrial sheds as business income or income from property.

Analysis:
The case involved the assessment of income received from industrial sheds constructed by the assessee on leased land. The Income Tax Officer (ITO) and Commissioner (Appeals) assessed the income as property income. However, the assessee argued that the income should be considered business income due to the nature of the activities undertaken, including providing consultancy services and promoting industries in the State of Karnataka.

The company's memorandum of association outlined objectives related to investing in various industries, providing consultancy services, and constructing buildings for commercial purposes. The company's prospectus also emphasized promoting industries and offering consultancy services. The correspondence with Mrs. Shanti R. Pai further supported the provision of consultancy services. These documents indicated that the construction of industrial sheds and leasing them out was part of the company's business venture, not merely property ownership.

The judgment referred to legal precedents such as Karanpura Development Co. Ltd. v. CIT and CIT v. National Storage (P.) Ltd., which distinguished between property income and business income based on the nature of the activities conducted. The Supreme Court's observations highlighted that income derived from trading activities, including leasing properties as part of business operations, should be treated as business income.

Drawing from these precedents, the Tribunal concluded that the income from the industrial sheds should be assessed as business income, not property income. The Tribunal found that the company's activities, including constructing the industrial estate, providing consultancy services, and promoting industries, aligned with business activities rather than mere property ownership. Therefore, the Commissioner (Appeals) was directed to assess the income from the industrial sheds as business income in the relevant years.

In conclusion, the appeals were partly allowed in favor of the assessee, emphasizing the characterization of the income from industrial sheds as business income rather than income from property.