1986 (7) TMI 73

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..... has taken on lease a site on December 6, 1973, on payment of stipulated rent for a period of 30 years. The lease, inter alia, stipulated that the assessee had to put up a building within certain time and upon expiry of the period of 30 years, the entire property with the building constructed thereon should revert to the lessor. Accordingly, the assessee constructed a building and let it out on rent. The income derived by way of rent was shown in the return as income from business. The Income-tax Officer, however, held that since the assessee had taken on lease the site in question and constructed the building at its own cost, the assessee had to be treated as the owner of the building during the period of the lease and the income derived fr .....

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..... came up for consideration before the Supreme Court in S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700. The assessee therein was also a private limited company. The objects of that company as per the memorandum of association were, among others, to purchase, take on lease or otherwise acquire and to hold, cultivate, improve, lease, sell, exchange, mortgage, or otherwise dispose of land, houses, mines, minerals, mining and other real and personal property and to deal with the same commercially. While considering the activities of the company and the income derived therefrom, the Supreme Court observed thus (at pages 700 and 701) : " The liability to tax under section 9 of the Income-tax Act, 1922, is of the owner of the buildi .....

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..... the lessee (assessee), the income derived from the property will have to be assessed as income from the " property " and not that of a " business ". Counsel for the assessee, however, invited our attention to the recent judgment of the Madras High Court in CIT v. Admiralty Flats Motel [1982] 133 ITR 895 in which a contrary view has been taken. We have perused the decision, but we do not find there any reference to the decision of the Supreme Court in S. G. Mercantile Corporation's case [1972] 83 ITR 700. With respect, therefore, we are unable to agree with the view taken by the Madras High Court. In the result, we answer the question in the affirmative and against the assessee. In the circumstances, we make no order as to costs.
Cas .....

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