Supreme Court: In the matter where a house property had been rented and the assesse, a private limited company, was receiving income from the said property by way of rent, the question that arose before the bench of Anil R. Dave and L. Nageswara Rao, JJ was that whether the income so received should be taxed under the head “Income from House Property” or “Profit and gains of business or profession”. The Court ordered in the favour of the assesse and held that the income so earned should be treated as its business income.
It was contended by the assessee that the assessee company is in business of renting its properties and is receiving rent as its business income, the said income should be taxed under the Head “Profits and gains of business or profession” whereas the Revenue had contended that as the income is arising from House Property, the said income must be taxed under the head “Income from House Property”.
The Court relied upon the decision in Chennai Properties and Investments Ltd. v. Commissioner of Income Tax, (2015) 14 SCC 793, where it was held that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income. It was held that the said judgment squarely applies to the facts of the case at hand and hence, the High court of Madras was not correct while deciding that the income of the assesse should be treated as Income from House Property. [Rayala Corporation Pvt. Ltd v. Assistant Commissioner of Income Tax, 2016 SCC OnLine SC 806, decided on 11.08.2016]