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TMI Blog2007 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee should be assessed under the head 'Income from business' instead of 'Income from properly' as assessed by the Income-tax Officer ?" 2 M/s. Hotel Ratanada International Pvt. Ltd., Jaipur (for short "the assessee") was incorporated on April 22, 1978. Inter alia , clause (3) of the memorandum of association provides that one of the objects of the company is to carry on all or any of the business in respect of land and/or properties, dwelling houses, hotels, motels, shops, offices, industrial estates, agricultural land, etc. 3 The aforesaid question relates to the assessment years 1981-82 and 1982-83. For the sake of convenience, we shall refer to the facts pertaining to the assessment year 1981-82. The status of the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er construction and, therefore, no depreciation was allowable on the land and building under construction as well. The Assessing Officer, thus, assessed the total income of the assessee at Rs. 25,965 as income from the property. 6 The assessee went in appeal from the order of the assessment. The Commissioner of Income-tax (Appeals) dismissed the appeal vide order dated January 8, 1987. By this order, the appellate authority also dismissed the appeal for the assessment year 1982-83. 7 In further appeal, the Income-tax Appellate Tribunal relied upon clause (3) of the memorandum of association and held that looking to the memorandum of association of the company and overall facts of this case, the rental income received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court considered some of its earlier decisions and culled out the legal position thus (page 461) "(1) no precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease, amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head 'Profits and gains of business or profession'; (2) it is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case, including true interpretation of the agreement under which the assets are let out (3) where all the assets of the business are let out, the period for which the assets are let out is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances, the rental income received by the assessee from its property, by no stretch of imagination, can be held to be income from business. Clause (3) of the memorandum of association does not alter that position at all. Clause (3) only provides, inter alia, the objects of the company to carry on business in respect of the land property dwelling house, hotels, motels, etc. The said clause cannot lead to any justifiable inference that the rental income of the assessee is an income from the business. 14 There being a specific head under the Income-tax Act, 1961, "Income from house property", the income received as rent from the property ordinarily must be computed under that head unless it is clearly established by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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