Law:

Section:

Section 22 of the Income-tax Act, 1961 - Income from house property - Chargeable as - Assessee constructed godown for being used in business. However, instead of using godown for its own business, assessee gave same on rent - Whether rental income must be computed under head of income from property - Held, yes FACTS The assessee-firm was carrying on business in the manufacture and sale of manure mixtures. It constructed a godown for being used in its business. However, instead of using the godown for its own business the assessee gave the same on rent to another firm. The ITO held that the rental income had to be assessed as income from other sources. The AAC, held that such income was income from house property, but enhanced the annual value of the godown. The Tribunal held that such income was income from business. On reference: HELD The assessee never actually utilised the godown for its own business purposes. Therefore, the rental income must be computed under the head of income from property. Note: The case was decided in favour of the assessee. CASE REFERRED TO Parekh Traders v. CIT [1984] 150 ITR 310 (Bom.) I.M. Munim and S.J. Mehta for the Applicant. R.J. Joshi and H.K. Sajnani for the Respondent. JUDGMENT Bharucha, J.-In this case the assessee at whose instance the reference is made, is a registered firm carrying on business in the manufacture and sale of manure mixtures. It is assessed to income-tax at Poona. It constructed a godown outside the municipal limits of Poona for being used in its business. Before the construction was completed, a firm named M/s. Parekh Traders requested (the assessee) that the godown be given to it on rent. There was no machinery nor plant fixed in the godown. Instead of using the godown for its own business the assessee gave the same on rent to M/s. Parekh Traders. The question that arose was whether the income so derived by the assessee should be treated as income from house property. The ITO held that…

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