HIGH COURT OF MADRAS

Commissioner of Income-tax

v.

Sanmar Holdings Ltd.

P.D. DINAKARAN AND P.P.S JANARTHANA RAJA, JJ.

T.C.(A) NOS. 707 OF 2005

November 13, 2006

Section 22 of the Income-tax Act, 1961 - Income from house property - Chargeable as - Assessment year 1984-85 - Whether before invoking section 22 for purpose of assessing rental income of assessee as an income from house property, revenue should satisfy whether building or land in question is owned by assessee and to find out whether there is any exploitation of property by assessee by giving it away for rent before assessing such rental income as an income from house property as, without such finding, it may not be proper for revenue to bring income derived from letting out of property as an income from house property - Held, yes

FACTS

The assessee-company offered the rental income of the building as business income on the ground that the income from letting out was to be treated as business income. The Assessing Officer, however, held that the entire income from the property was assessable under the head ‘Income from house property’ under section 22. On appeal, the Commissioner (Appeals) confirmed the impugned order. On further appeal, the Tribunal allowed the assessee’s said claim.

On revenue’s appeal:

HELD

The impugned order of the Tribunal was liable to be set aside for the reason that the revenue should satisfy whether the building or land in question was owned by the assessee before invoking section 22 for the purpose of assessing the rental income of the assessee as an income from the house property and to find out whether there was any exploitation of the property by the assessee by giving it away for rent before assessing such rental income as an income from house property, as, without such finding, it might not be proper for the revenue to bring the income derived from letting out of the property as an income from house property. [Para 15]

Consequently, the order of the Tribunal was to be set aside and the matter was to be remitted to the Assessing Officer to go into the factual question as referred to above and to consider the question afresh, in accordance with law. [Para 16]

The appeals were to be allowed. [Para 17]