2015 (5) TMI 311 - HC - Income Tax

Treatment to rental income - Business income or House property - assessee himself in his wealth-tax return has treated the self-same house property, from which the rental income has been derived, as stock-in-trade and on that basis contended that he is not liable to pay wealth-tax - Held that - As regards the first contention of revenue that the assessee cannot be permitted to blow hot and cold by taking one stand before the Income-tax authority and another before the wealth-tax authority, it can straightaway be pointed out that this question can be raised in the wealth- tax proceedings and may be decided in accordance with law. But, in so far as the Income-tax is concerned, that can only be levied in accordance with the provision of the Act. Submission of revenue that main object of the company appears to be dealing in property and, therefore, the object is business and, therefore, that should be treated as business income cannot be accepted because the object is both to earn money by selling the property as also by letting them out. It cannot be said that the company is not authorised by the memorandum to earn profit by letting out. Therefore, this submission of Mr. Saraf is not of any significance. The point raised in this appeal is covered by a judgment of this court in the case of the assessee itself 2011 (9) TMI 729 - Calcutta High Court wherein held that the income on account of rent from the unsold flats should be treated as an income from house property. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the judgment treating rental income as business income.
2. Binding nature of concession on a point of law.
3. Interpretation of income from unsold flats as income from house property.
4. Distinction between income from house property and business income.
5. Treatment of property ownership and leasing in the context of business operations.
6. Consideration of company's main object in determining nature of income.

Analysis:
1. The appeal challenges a judgment treating rental income as business income, based on a concession made before the Tribunal. The appellant argues that such a concession does not bind the assessee, citing a previous judgment interpreting income from unsold flats as income from house property.

2. The issue of the binding nature of a concession on a point of law is raised, emphasizing that the assessee cannot be held to a concession made before the Tribunal. The appellant relies on a court judgment to support this argument.

3. The interpretation of income from unsold flats as income from house property is highlighted, referencing a previous judgment in the assessee's own case. This interpretation is crucial in determining the nature of the rental income in question.

4. The distinction between income from house property and business income is discussed, with the Revenue arguing that the rental income should be treated as business income based on the company's main object of dealing in property. However, the appellant contests this interpretation.

5. The judgment considers the ownership of property and leasing it out in the context of business operations. It references legal principles to distinguish between property ownership for enjoyment and property ownership for trading purposes, impacting the classification of income.

6. The company's main object, as stated in its memorandum, is analyzed to determine the nature of the income. The court concludes that the company's object includes both selling and letting out property, indicating that the company is authorized to earn profit through renting out properties.

In conclusion, the court rules in favor of the assessee, citing previous judgments and the company's authorized activities as reasons for treating the rental income as income from house property. The judgment provides a detailed analysis of legal principles and interpretations to support its decision.