Law: Income Tax Act, 1961

Section: 22

Law: Income Tax Act, 1961

Section: 22

Section 28(i), read with section 22 of the Income tax Act, 1961 [Corresponding to section 10, read with section 9 of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessment years 1948-49 and 1949-50 - Whether rental income arising out of buildings owned by assessee and let out to its employees would be income from business and therefore, such rental income would be assessed under section 10 and not under section 9 of 1922 Act - Held, yes FACTS The assessee was a public limited company. The assessee owned several buildings out of which some were let out by the assessee to its employees and also to some outsiders. Out of the total rent recovered from these premises, a certain sum was deducted from the wages of its employees. In the assessment years 1948-49 and 1949-50, the ITO proceeded to assess its rental income from employees as "income from property" under section 9. The assessee contended that the premises were let out to the employees for the purposes of its business and the rental income fell to the computed under section 10 of the 1922 Act which was rejected by the ITO and in appeal, by the AAC. On further appeal, the Tribunal held that the rental income of the assessee from the property let out to its employees fell to be computed under section 10 of the 1922 Act as "profits and gains of business". On application under section 66(2) of 1922 Act : HELD It was apparent from the statement of the case that the company was engaged in a number of manufacturing business, such as, cloth, chemicals, sugar, distillery, printing and the manufacture of hydrogenated oils (vanaspati). A large number of employees was engaged in these businesses. The premises where the employees were housed and for which they paid rental to the company were in the vicinity of the mills. The rental of these premises was fixed and did not change with the change of the occupant. The rental was deducted from the wages of the employee or employees occupying the premises. These employees were engaged in the main business of the company and their residence in the buildings in dispute was incidental to their main occupation, that was, the carrying on of the business of…

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