Business income or house property income: S/s. 22 and 28: A. Y. 2003-04: Assessee owner of property: Hotel run in property by company of which assessee was director: No lease of property: Share of profits received by assessee: Assessable as business income:

Assessee was the owner of the property. Hotels were run in the property by a company in which assessee was director. There was no lease agreement. The assessee was entitled to a certain share in the gross operating profit calculated in terms of the agreement. The asessee disclosed the income as business income and claimed deduction of expenditure and depreciation. The Assessing Officer assessed the income as income from house property and disallowed the claim for deduction of expenditure and depreciation. The CIT(A) and the Tribunal allowed the assessee’s claim.

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

“i) The Commissioner (Appeals) had given a detailed factual finding why income earned by the assessee from the three properties was taxable under the head “Income from business or profession” and not under the head “Income from house property”. This finding had been upheld by the Tribunal. The findings were not perverse and were based on documents and material placed on record. This income was assessable as business income.

ii) Once it was held that the income from the three properties was taxable under the head “Income from business or profession” depreciation had to be allowed under the provisions of section 32. Similarly, disallowance of 80% from the expenses deleted by the Commissioner (Appeals)/Tribunal had been explained and supported by cogent reasoning. The depreciation and the expenditure were deductible.”