TMI Blog1965 (2) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ms to customers was to be separately computed and assessed under section 9? So far as the first question is concerned, it is not happily worded and, therefore, we have recast this question as follows: Whether, on the facts and circumstances of the case, the rooms were used for purpose of business and income arising therefrom is assessable under section 10? It is common ground that if the first question is answered against the assessee, the second must also be so answered. The assessee is an individual and the matter in dispute relates to three assessment years 1954-55, 1955-56 and 1956-57. The assessee had purchased a piece of land in the Friends' Colony, Mathura Road, New Delhi, and had built a house consisting of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om business and, therefore, liable to assessment under section 10 of the Indian Income- tax Act, 1922 (hereinafter referred to as the Act). On appeal by the assessee, the Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. The assessee moved the Tribunal in further appeal and his appeal has been dismissed by the Tribunal. The Tribunal, while dismissing the appeal, found the following facts: (i) The past history of Shri Manohar Singh showed that he is an expert in this line of business, viz., catering and looking after the persons who come and stay in this type of guest houses. (ii) The past records showed that the assessee in the past derived income from catering from Mandi House Mess and Kotah House ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is capital in property and derive income from rent from permanent tenants and was not a rentier. The assessee's income depended upon the reputation, goodwill and efficiency of service, which was the characteristic of this type of business. The assessee was dissatisfied with the order of the Tribunal, and, therefore, applied under section 66(1) of the Act to the Tribunal to refer to this court the question of law arising out of the order of the Tribunal. The Tribunal allowed the application and, after drawing up a statement of the case, has referred the two questions of law, already set out above, for the decision of this court. The contention of the learned counsel for the assessee is the same as has been before the Tribunal, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a trading concern in the course of its business. 5. House-owning, however profitable, cannot be a business or trade under the Income-tax Act. Where income is derived from house property by the exercise of property rights properly so called, the income falls under the head 'income from property' chargeable under section 9. It is the nature of the operations and not the capacity of the owner that must determine whether the income is from property or from trade. Where the operations involved in the activity of earning income from house property are not different from those of an ordinary house-owner turning to profitable account the property of which he is the owner, the income derived is income from property chargeable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from property falling under section 9 and the exception to section 9 may also come into operation in such cases. It will also be profitable to refer to the decision of the Supreme Court in East India Housing and Land Development Trust Ltd. v. Commissioner of Income-tax [1961] 42 I.T.R. 49, 51 (S.C.). In this case, the contention was that the rental income of the assessee-company from certain buildings was income from business and not income from property , because the assessee-company had been formed with the object of promoting and developing markets. The income that the company derived was from markets and stalls erected by it. The assessee was required to obtain a licence from the Corporation of Calcutta and to maintain sanitar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the learned counsel for the assessee places his reliance for his contention that the rental income of the rooms in question is income from property and thus assessable only under section 9 of the Act. It may be that the assessee's income, in common parlance, can be said to arise partly from the rental of property and partly from the business of running a paying guest establishment, i.e., business. But for the purposes of income-tax, the correct approach is to find out which is the specific head under which the said income falls. The said income may indirectly be covered by another head under section 6; but that by itself will not make that income assessable under the other head. Therefore, in each case, the question that ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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