RAJ DADARKAR & ASSOCIATES versus ACIT-CC-46

Citation: [2017] 4 S.C.R. 20 · Decided: 09-05-2017 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Dismissed

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Judgment (excerpt)

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[20 i 7] 4 S.C.R. 20 
RAJ DADARKAR & ASSOCIATES 
v. 
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ACIT-CC-46 
(Civil Appeal Nos. 6455-60of2017) 
MAY09,2017 
[A. K. SIKRI AND ASHOK BHUSHAN., JJ.] 
' 
Income Tax Act, 1961: 
SS. 22 and 27(iiib) - Assessee firm took leasehold rights of 
stilt area of a portion of a building in auction, on monthly licence -
To .. run municipal market -After constructing the market area, gave 
the same to various persons on sub-licensing basis - Income from 
the sub-licensed shops whether would be assessed under the head 
"Profits and Gains of Business or Profession" or under the head 
"Income from House Property" - Held: The assessee would be 
treated as deemed owner of the premises in terms of s.27(iiib) and 
hence its income from the sub·licensed shops in the premises is liable 
to be assessed under the head "Income from House Property'.'. 
Tax/Taxation: 
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Income tax - Nature of - Held: Income tax is only one tax 
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which is levied on the sum total of the income classified and 
chargeable under various heads - It is not collection of distinct 
taxes levied separately on each head of the income._ 
, Dismissing the appeals, the Court 
HELD: 1. It is not in dispute that having regard to the terms 
and conditions on which the leasehold rights were taken by the 
appellant in auction, constructed the market area thereupon aud 
gave the same tO various .persons on sub-licensing basis, the 
appellant would be treated as deemed o_wner of these premises 
in terms of Section 27(iiib) of the Income Tax Act. The High Court 
took note of the provisions of Section 27(iiib) as well as Section 
269UA(t) of the Act. [Para 10] (27-D] 
2. Section 14 of t_be Act enumerates five beads of income 
for the purpose of charge of income tax and computation of total 
income. These are: Salaries, Income from house property, Profits 
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RAJ DADARKAR & ASSOCIATES v. ACIT - CC-46 
and gains of business or profession, Capital gains and Income 
from other sources. A particular income, therefore, has to be 
classified in one of the aforesaid heads. It is on that basis rules 
for computing. income and permissible deductions which arc 
contained in different provisions of the Act for each of the aforesaid 
· heads, are to be applied. [Para 13) [29-C-D) 
3. Income tax is only One Tax which is levied on the sum. 
total of the income classified and chargeable under the various 
heads. It is not a collection of distinct taxes levied separately on 
each head of the income. [Pam 13) (29-E] 
4. There may be instances where a particular income may 
appear tQ fall in more than one head. Wherever there is an income 
from leasing out of premises and iCOllecting rent, normally such 
an income is to be treated as in'Chme from house property, in 
case provisions of Section 22 of the Act arc satisfied with primary 
ingredient that the assessee is the owner of the said building or 
lands appurtenant thereto. 'Owner of the house property' is 
defined in Section 27 of the Act which includes certain situations 
where a person not actually the owner shall be treated as deemed 
owner of a building or part thereof. In the present case, the 
appellant is held to be "deemed owner" of the property in 
question by virt~e of Section 27(iiib) of the Act. On the other 
band, under certain circumstances, where the income may have 
been derived from letting out of the premises, it can still be 
treated as business income if letting out of the premises itself is 
the business of the asscsscc. [Para 14) [29-E-F, G-H; 30-B) 
5. Merely because there is an entry in the object clause of 
the business showing a particular object, would not be the 
determinative factor to arrive at a conclusion that the income is· 
to be treated as income from business. Snch a question would 
depend upon the circumstances of each case. Even otherwise, 
the object clause which. is contained in the partnership firm is to 
take the premises on rent and to sub-let. In the present case, 
reading of the object clause would bring out two discernible facts, 
i.e. (a) the business activity is of taking the premises on rent and 
sub-letting them and (b) partnership firm may take any other 
business as may be mutualiy agreed upon by the partners. [Paras· 
15 and 16) (30-D, G-H; 3l·A-C) 
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SUPREME COURT REPORTS 
[2017] 4 S.C.R. 
Sultan Bros. (P) Ltd. v. CIT, [1964) 5 SCR 807 - followed. 
6. Apart from relying upon the clause in the partnership 
deed to show its

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