Case Law Details
PSTS Heavy Lift and Shift Ltd Vs DCIT (Madras High Court)
The issue under consideration is whether the income earned by the Assessees during the Assessment Years in question from letting out of its warehouses or property to lessees, is taxable under the head ‘Income from Business’ or ‘Income from House Property?
High Court states that, in the present cases, it is not even in dispute that all the exclusive and main source of income of the Assessee was only the rentals and lease money received from the lessees in both the cases and the Assessing Authority took a different and contrary view mainly to deny the claim of depreciation out of such business income in the form of rentals, without assigning any proper and cogent reason. Merely because the lease income or rental income earned from the lessees, could be taxed as ‘Income from House Property’, ignoring the fact that that such rentals were the only source of ‘Business Income’ of the Assessee, the Authorities below have fallen into the error in holding that the income was taxable under the Head Income from house property. The said application of the Head of Income by the Authorities below was not only against the facts and evidence available on record, but against the common sense itself.. The amended definition under Section 22 of the Income Tax Act, 1961, now defines the ‘Income from House Property’ as the annual value of property, as determined under Section 23 of the Act, consisting of buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property, as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, shall be chargeable to Income Tax under the head ‘Income from house property’. Thus, even the amended definition intends to tax the notional income of the self occupied portion of the property to run Assessee’s own business therein as business Therefore, the other rental income earned from letting out of the property, which is the business of the Assessee itself, cannot be taxed as Income from house property. Moreover, the Heads of Income, as defined in Section 14 of the Act do not exist in silos or in watertight compartments under the Scheme of tax and thus, these Heads of Income, as we have noted above, are fields and heads of sources of income depending upon the nature of business of the Assessee. Therefore, in cases where the earning of the rental income is the exclusive or predominant business of the Assessee, the income earned by way of lease money or rentals by letting out of the property cannot be taxed under the Head ‘Income from hosue property’, but can only be taxed under the Head ‘Income from business income’. In view of the aforesaid, where the facts of the cases are undisputed that both the Assessees in the present case carry on the business of earning the rental income, as per the Memorandum of Associations only and the fact is that they were not carrying on any other business, compels us to come to the conclusion that the present appeals of the Assessees are required to be allowed. The same are accordingly allowed and the question of law framed above is answered in favour of the Assessee and against the Revenue.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The substantial question of law involved in the present tax appeals filed by the Assessees is “Whether the income earned by the Assessees during the Assessment Years in question from letting out of its warehouses or property to lessees, is taxable under the head ‘Income from Business’ or ‘Income from House Property?”
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