TMI Blog1990 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... se 3(B)(i) of the memorandum of association stated that an incidental or ancillary object was to undertake to sell or lease or mortgage the whole or part of any property, land, buildings, structures, movable or immovable, of the company in furtherance of its objects. For the accounting periods ending on July 31, 1968 and July 31, 1969, relevant to the assessment years 1969-70 and 1970-71, the assessee returned an income of Rs. 3,16,201 and Rs. 2,51,870 respectively, under the head "Business". However, the Income-tax Officer treated the income derived by the assessee-company as income derived from letting out of the properties purchased and owned by it and, in that view, brought to tax the income returned as "income from property", subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d part of the commercial assets of the company in order to enable the company to carry on its business in accordance with the objects as set out in the memorandum of association and that the substituted user of such commercial assets by the assessee-company does not alter the character of the asset and, therefore, the income derived by the assessee-company ought to be properly assessed under the head "Business income". In this connection, learned counsel for the assessee-company also placed strong reliance upon the decisions reported in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC), S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 (SC), Addl. CIT v. Hindustan Machine Tools Ltd. [1980] 121 ITR 798 (Kar) and CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation has also been enumerated in the relevant provisions of the Act. However, it must be remembered that the heads of income enumerated in the Act are in sense mutually exclusive and income which appropriately falls under one head, cannot be assigned or subjected to tax under another head. The aforesaid principles are too well-settled. However, the question remains whether in this case the income of the assessee-company could be assessed under the head "Profits and gains of business" or "Income from property". In the case of a company with certain professed and avowed objects, from the nature of its dealings with property and the manner in which its activities had been carried on, it would be possible to say under which head the income s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one or the other must necessarily depend upon the object with which tile act is done. It is not that no company can own property and enjoy it as property, whether by itself or by giving the use of it to another on rent. Where this happens, the appropriate head to apply is 'income from property' (section 9), even though the company may be doing extensive business otherwise. But a company formed with the specific object of acquiring properties not with the view to leasing them as property but to selling them or turning them to account even by way of leasing them out as an integral part of its business, cannot be said to treat them as landowner but as trader . . . ." Earlier, on a consideration of the memorandum of association relating to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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