TMI Blog2016 (5) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble jurisdictional High Court in the case of Capital Foundry and Engineering Works v. CIT [1981 (11) TMI 42 - PUNJAB AND HARYANA High Court ] very clearly held that once the profits or gains are made from the exploitation of a commercial asset, then whether the assessee carries on business himself or it had been run by another person as a lessee, makes no difference. In the present case, similar is the situation. The judgment in the case of Dal Chand and Sons v. CIT [1967 (12) TMI 7 - PUNJAB AND HARYANA High Court] was later followed by the hon'ble jurisdictional Punjab and Haryana High Court in the case of Nauharchand Chananram v. CIT [1970 (10) TMI 12 - PUNJAB AND HARYANA High Court ] (P&H) also. Thus we hold that the lease rental rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer that running of hotels is only under the other aims and objects in the memorandum of association of the assessee-company. Further, relying on a number of judgments of various High Courts, he held that the incomes received by the assessee from leasing out of these hotels are to be taxed under the head Income from house property . 3. Aggrieved by this, the assessee went in appeal before the learned Commissioner of Income-tax (Appeals) and made detailed submissions. It was submitted that the lease income from the hotel industry was business income, for which reliance was placed on a number of judgments of the hon'ble Supreme Court. The learned Commissioner of Income-tax (Appeals) distinguished all the cases so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re would not have been any tenants to take on lease. Thus, the assessee was doing the business activities. It was also submitted that the assessee-company is engaged in the business of running of the hotels on lease basis during the year under consideration and also in the subsequent assessment year, the assessee has earned the income from the said source only. The assessee- company has concentrated on its efforts in an organised manner in construction of hotels ; and establishing them in a running condition. Only for business expediency, the assessee has engaged an expert manager for managing the hotels. The submissions were also made to the effect that the business involves and includes exploitation of commercial asset to the advantage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book, where these certificates are appended. Permission from the Town and Country Planning Department, Himachal Pradesh has also been taken to construct the hotels. Copy of permission is placed at paper book page 15. These facts have not been disputed at any stage. Therefore, in the background of these facts, the only issue to be decided by us is whether it is business income or income from, house property . A large number of cases have been cited by the Assessing Officer, the learned Commissioner of Income-tax (Appeals), the learned Departmental representative and also by learned counsel for the assessee. 7. Whether a particular letting is business or not has to be decided in the facts and circumstances of each case. Each ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence after the persistent efforts of the assessee at various levels. The development of two such hotels, not only one, in the assessee's case also strengthens the contention of the assessee that it is in the business of running hotels. 8. The hon'ble Supreme Court in the case of Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 (SC) has laid down certain tests from which the inference of income being business or house property can be drawn. The hon'ble Supreme Court opines that if the services rendered by the assessee are the results of its activities carried on continuously in an organised manner with a set purpose and with a view to earn profits, those activities would constitute business activities. The activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular time, is found to be more responsive to profit if allowed to be run as such by another as lessee. In either case the owner of the factory carried on the business of earning profits and gains from such an asset. . . . So long as a business asset is exploited as such and profits or gains are earned from it, the same are profits and gains of a business, however the owner of the commercial asset exploits the same. So when it is said whether he carried on the business himself or not that only means whether he carried on a business activity which may have led to his earning profits or making gains. Once profits or gains are made from the use of the commercial asset itself, then the further detail whether the owner ran the commercial a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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