2015 (5) TMI 46 - SC - Income Tax

Rental income from letting out of properties - Business income or Income from House property - Letting out of property is the main objective of the company - Income classification depend on the circumstances of each case - Held that:- We are of the opinion that the judgment in Karanpura Development Co. Ltd. [1961 (8) TMI 7 - SUPREME Court ] squarely applies to the facts of the present case. In this case it was held that "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned".

No doubt in Sultan Brothers (P) Ltd. [1963 (12) TMI 4 - SUPREME Court ], Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not.

We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, 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' - Decided in favour of assessee.