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2007] 293 ITR 557 [2007] 164 Taxman 292 (Rajasthan) HIGH COURT OF RAJASTHAN, JAIPUR BENCH Commissioner of Income-tax, Jaipur v. Hotel Ratanada International (P.) Ltd.* R.S. CHAUHAN AND R.M. LODHA, JJ. D.B. IT APPEAL NO. 2 OF 1995 MAY 9, 2007 Section 22 of the Income-tax Act, 1961 - Income from house property - Chargeable as - Assessment years 1981-82 and 1982-83 - Whether where assessee claimed to have engaged in hotel business, but construction of hotel had neither been completed during relevant assessment year nor any hotel business had commenced, rental income received by assessee from its property, by no stretch of imagination, could be said to be income from hotel business - Held, yes FACTS The assessee-company, allegedly engaged in hotel business, filed the return showing only rental income of certain sum from flats and office. Against this income, the assessee claimed various expenses in respect of repairs, electricity and water charges, etc., for the properties let out. The expenses for the maintenance of office, interest and depreciation were also claimed. The Assessing Officer held that the rental income had to be taxed under the head 'Income from property'. The claim for depreciation was disallowed as depreciation was not allowable in respect of the income from house property. The building was found to be under construction and, therefore, the Assessing Officer held that no depreciation was allowable on the land and building under construction as well. The Assessing Officer, thus, assessed the total income of the assessee as income from house property. On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer. On second appeal, the Tribunal, considering the memorandum of association of the assessee, held that the rental income should be assessed under the head 'Income from business'. On reference : HELD The Supreme Court in the case of Universal Plast Ltd. v. CIT [1999] 237 ITR 454/ 103 Taxman 493, while deciding the principal question as to whether the income received by the assessee by leasing out the factory was business income, laid down the following legal position : (1) no precise test can be laid down to ascertain…

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