LexM/S CHENNAI PROPERTIES & INVESTMENTS LTD., CHENNAI versus THE COMMISSIONER OF INCOME TAX CENTRAL 111, TAMIL NADU
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[2015] 4 S.C.R. 413 413 M/S CHENNAI PROPERTIES A & INVESTMENTS LTD., CHENNAI V. THE COMMISSIONER OF INCOME TAX CENTRAL 111, TAMIL NADU B Civil Appeal No. 4494 of 2004 APRIL 09, 2015. [ A.K. SIKRI AND R. F. NARIMAN,JJ. ] C Income Tax Act, 1961: Business income - ff an assessee acquires properties and lets out and such letting out of properties is the business of assessee then the income received from letting out of such properties is D business income - It cannot be treated as 'income from the house property'. East India Housing and Land Development Trust Ltd. v. Commissioner of Income Tax, West Bengal (1961) 42 E ITR 491; Sultan Brothers (P) Ltd. v. Commissioner of Income Tax 1964 (5) SCR 807; Karanpura Development Co. Ltd. v. Commissioner of Income Tax, West Bengal 44 ITR 362 SC - relied on. Case Law Reference (1961) 42 ITR 491 1964 (5) SCR 807 44 ITR 362 SC relied on. relied on. relied on. Para 2 Para 2 Para 8 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4494 of 2004. 413 F G H 414 SUPREME COURT REPORTS [2015] 4 S.C.R. A From the Judgment and Order dated 05.09.2002 of the 8 High Court of Judicature at Madras in Tax Case No. 129 of 1997 with C. A. Nos. 4491-4493 of 2004 Pridesh Kapur, Ms. Radha Rangaswamy, Rupinder Singh, V. Balachandran, for the Appellant. C Guru Kirshna Kumar, Niranjana Singh, S. A. Haseeb, D Anil Katiyar, 8. V. Balaram Das, for the Respondent. The Judgment of the Court was delivered by A. K. SIKRI, J. CIVIL APPEAL NO. 4494 OF 2004. 1. The appellant-assessee is a company incorporated under the Indian Companies Act. Its main objective, as stated in the Memorandum of Association, is to acquire the E properties in the city of Madras (now Chennai) and to let out those properties. The assessee had rented out such properties and the rental income received therefrom was shown as income from business in the return filed by the F assessee. The assessing officer, however, refuse to tax the same as business income. According to the a:::~essing officer, since the income was received from letting out of theproperties, it was in the nature of rental income. He, thus, held that it would be treated as income from house G property and taxed the same accordingly under that Head. 2. The assessee filed the appeal before the Commissioner of Income Tax (Appeals) who allowed the same by his orders dated 06.04.1989 holding it to be H CHENNAI PROP. & INVESTMENTS LTD. v. THE 415 COMMNR. OF l.T. CENTRAL Ill, T. N. [A. K. SIKRI, J.] income from business and directed that it should be treated A as such and taxed accordingly. Aggrieved by that order, the Department filed appeal before the Income Tax Appellate Tribunal which declined to interfere with the order of the Commissioner of Income Tax (Appeals) and dismissed the B appeal. The Department approached the High Court. This appeal of the Department has been allowed by the High Court vide its order dated 05.09.2002 holding that the income derived by letting out of the properties would not be income from business but could be assessed only C income from house property. A perusal of the impugned judgment of the High Court would show that it has primarily rested its decision on the basis of the judgment of this Court in 'East India Housing and Land Development Trust D Ltd. v. Commissioner of Income Tax, West Bengal [(1961) 42 ITR 49] as well as the Constitution Bench judgment of this Court in 'Sultan Brothers (P) Ltd. v. Commissioner of Income Tax' [1964 (5) SCR 807]. C· 3. From the aforesaid facts, it is clear that the question which is to be determined on the facts of this case is as to whether the income derived by the company from letting E out this property is to be treated as income from business F or it is to be treated as rental income from house property. 4. Wtq_ have heard the learned counsel for the parties on the aforesaid issue. Before we narrate the legal principle that needs to be applied to give the answer to the G aforesaid question, we would like to recapitulate some seminal features of the present case. 5. The Memorandum of Association of the appellant- H 416 SUPREME COURT REPORTS [2015] 4 S.C.R. A company which is placed on record mentions main objects as well as incidental or ancillary objects in clause· Ill. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as 8 "Chennai Hou
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