Business income/House property income: Rent from leave and licence of office premises: Assessable as business income.

The assessee company was carrying on business of import and sale of scientific instruments. It purchased premises at Nariman Point, Mumbai in 1982 and had its regional office there. In November 1987, the assessee gave the property on leave-and-licence basis to Citibank. The rental income so received was offered to tax by the assessee as ‘business profits’. The Assessing Officer assessed the income as ‘income from house property’. The Tribunal upheld the assessment.

On appeal by the assessee, the Allahabad High Court reversed the decision of the Tribunal and held as under:

“(i) In Universal Plast Ltd. v. CIT, 237 ITR 454 (SC), tests were laid down as to when income from property is assessable as ‘business profit’ and as ‘income from house property’.

(ii) Applying these tests, the rental income has to be assessed as ‘business profits’ because

(a) All assets of the business were not rented out by the assessee and it continued the main business of dealing in scientific apparatus, etc.

(b) The property was being used for the regional office and was let out by way of exploitation of business assets for making profit.
(c) The assessee had not sold away the properties or abandoned its business activities. The transaction is a ‘commercial venture’ taken in order to exploit business assets and for receiving higher income from commercial assets.”