Business Income or Income from House Property – Assessee having one business of leasing its property and earning rent therefrom – Rent received from property should be treated as business income-

Rayala Corporation Pvt. Ltd. vs. ACIT [2016] 386 ITR 500 (SC)

The appellant-assessee, a private
limited company, was having house property, which had been rented.  The issue that arose before the Supreme Court
was whether the income so received should be taxed under the head “Income from
house property” or “Profit and gains of business or profession”. the  reason for which the aforestated issue had
arisen was that though the assessee was having the house property and was
receiving income by way of rent, the case of the assessee was that the assessee
company was in business of renting its properties and was receiving rent as its
business income, the said income should be taxed under the head “Profits and
gains of business or profession” whereas the case of the revenue was that as
the income was arising from house property, the said income should be taxed
under the head “income from house property”.

According to the Supreme Court,
the law laid down by it in the case of Chennai Properties and Investments Ltd.
vs. CIT (2015) 373 ITR 673 (SC) showed the correct position of law and looking
at the facts of the case in question, the case on hand was squarely covered by
the said judgment.

The Supreme Court noted the
submissions made by the counsel appearing for the revenue which were to the
effect that the rent should be the main source of income or the purpose for
which the company was incorporated should be to earn income from rent, so as to
make the rental income to be the income taxable under the head “Profits and gains
of business or profession”.

The Supreme Court observed that
it was an admitted fact in the instant case that the assessee company had only
one business and that was of leasing its property and earning rent therefrom. Thus,
even on the factual aspect, the Supreme Court did not find any substance in
what had been submitted by the learned counsel appearing for the revenue.

The  Supreme Court held that the business
of the company was to lease its property and to earn rent and
therefore, the income so earned should be treated as its business income
and that the high Court was not correct while deciding that the income
of the assessee should be treated as income from house property,