Law:

Section:

Section 28 of the income-tax act, 1961-Business income-Sheds leased out on rental basis for manufacture of ancillary products to be used by assessee-Whether tribunal justified in holding it as income from business and not income from property-Held, on facts, yes Facts Hindustan Machine Tools Ltd., constructed an industrial estate with the object of having ancillary units which would manufacture components required for the purposes of the machines in the manufacture of which it was engaged. Fifty sheds were constructed in that estate and leased out to several persons on a rental basis. The assessee also supplied raw material at cost and rendered free technical services and supervision to these units which were to manufacture exclusively for its use. The ITO treated the income from leasing of the sheds for the assessment year 1966-67 as income from property under section 22 as the assessee was the owner of the sheds. The AAC and the Tribunal held that the income should be computed under the head "Profits and gains of business or profession" under section 28 on the ground that the leasing was incidental to and for the purpose of the assessee's business of manufacture of various machines. On reference : Held Section 22 itself indicates that mere ownership of the property does not lead to assessment of its income therefrom under the head "Income from house property". It excepts portions of such property as may be occupied for the purpose of any business or profession carried on by him, the profits of which are chargeable to income-tax. The guidance to be sought is to find out the user of the property and the character in which that property is used. In the instant case, the facts are much stronger than in the cases where letting out accommodation to the employees or housing post office and other amenities were concerned. The benefit derived by the assessee is almost direct, namely, continuous supply of components to keep up its own production and manufacturing of components under its own guidance and scrutiny. Further, the assessee can be said to be in occupation of the premises so let out for the purposes of its own concern, i.e., by hiring out the sheds with a…

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