Where renting out properties is main business, then income is rightly taxed as Business Income

Chennai Properties & Investments Ltd. v. Commissioner of Income-tax, Central -III, Tamil Nadu [2015] 56 taxmann.com 456 (SUPREME COURT)


Where in terms of memorandum of association, main object of assessee-company was to acquire properties and earn income by letting out same, said income was to be brought to tax as business income and not as income from house property

FACTS

• The assessee-company was incorporated with main objective, as stated in the Memorandum of Association, to acquire the properties in the city and to let out those properties. The assessee had rented out such properties and the rental income received therefrom was shown as income from business. 
• The Assessing Officer took a view that the rental income received by assessee was to be taxed as income from house property. 
• The Commissioner (Appeals) as well as the Tribunal accepted assessee's claim holding that amount in question was to be taxed as business income. 
• The High Court, however, restored order passed by the Assessing Officer. 

On appeal to the Supreme Court:

HELD

• The Memorandum of Association of the assessee-company mentions that main object of the company is to acquire and hold the properties and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. It may further be noted that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order.
• In aforesaid circumstances, it is concluded that letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the head income from business. It cannot be treated as 'income from the house property'. Accordingly, instant appeal is allowed and order of the High Court is set aside.