Business income vs. Income from house property- A. Ys. 2004-05, 2005-06, 2007-08 and 2009- 10- Assessee letting out godowns and warehouses to manufacturers, traders and companies carrying on warehousing business- Income is assessable as business income

The assessee was engaged in the business of warehousing, handling and transport business. For the A.Ys. 2004-05, 2005-06, 2007-08 and 2009-10, the assessee showed the income from letting out of buildings and godowns as income from business. The Assessing Officer treated the income as income from house property. The assessee contended that its activity was not merely letting out of the warehouses but storage of goods with provision of several auxiliary services such as pest control, rodent control and preventive measures against decay of goods stored due to vagaries of moisture and temperature, fungus formation, etc., besides security and protection of the goods stored. The Commissioner (Appeals) allowed the assessee’s claim and held that the assessee carried out the activity in an organised business manner. These activities were more than mere letting out of the godowns for tenancy. The Department itself had accepted in the past that the income from warehousing was assessable as income from business. The Tribunal upheld the decision of the Commissioner (Appeals).

On appeal by the Revenue, the Madras High Court upheld the decision of the Tribunal and held as under:

“i) T he Commissioner (Appeals) as well as the Tribunal had not only gone into the objects clauses of the memorandum of association of the assessee but also into individual aspects of the business to come to the conclusion that it was a case of warehousing business and, therefore, the income would fall under the head “Business income”.

ii) T hus, the income of the asessee from letting out its warehouses was chargeable under the head “Income from business” and not under the head “Income from house property”.