2005 (8) TMI 78 - HC - Income Tax

Income from property - (1) Whether the Appellate Tribunal is right in law in directing the Income-tax Officer to treat the income from property known as Kunj Bungalow under the head Business ? (2) Whether the Appellate Tribunal is right in law in deleting the income from property known as Jadav Bungalow ? - there is no infirmity in the conclusion arrived at by the Tribunal. Question No. 1 is accordingly answered in the affirmative i.e. in favour of the assessee and against the Revenue. - Question No. 2 is accordingly answered in the affirmative i.e. in favour of the assessee and against the Revenue.

Summary

Issues:
1. Whether the income from property 'Kunj Bungalow' should be treated under the head 'Business'?
2. Whether the income from property 'Jadav Bungalow' should be deleted?

Analysis:

Issue 1:
The case involved the assessment of income from 'Kunj Bungalow' for the years 1977-78 and 1978-79. The firm, constituting five partners, was formed for running a hotel in Baroda or any other business mutually agreed upon. One partner contributed 'Kunj Bungalow' as capital. Initially, the Assessing Officer assessed the income from the property as 'Income from house property'. The Appellate Assistant Commissioner upheld this decision. However, the Income-tax Appellate Tribunal directed the Assessing Officer to treat the income from 'Kunj Bungalow' under the head 'Business'. The Tribunal found that the property was brought into the partnership for business purposes and had been assessed as such since the firm's inception. Despite temporary rental in a previous year, the property was primarily used for business. The High Court affirmed the Tribunal's decision, stating that the findings were based on evidence and upheld the treatment of income from 'Kunj Bungalow' as 'Business'.

Issue 2:
Regarding 'Jadav Bungalow', the Tribunal had deleted the income. The High Court noted that a previous decision in the assessee's case had already settled the issue. Referring to the decision in CIT v. Gaekward and Co. [2005] 277 ITR 553, the High Court agreed with the Tribunal's deletion of income from 'Jadav Bungalow'. Therefore, the Court answered both questions in favor of the assessee and against the Revenue, disposing of the reference without costs.