09 September 2009
Hiee.....can anyone solve my query.........i.e.
A person having construction business,It receives rent from a property which is bought for new construction of buildings. Is this rent Income fall under Income from House Property? Why when this property has been bought for his regular business activity? Tell Me Reason too.
09 September 2009
Lease of business assets - In the light of various decisions of the Supreme Court the following propositions emerge regarding taxability of income from leasing out of business assets—
(1) No precise test can laid down to ascertain whether income (referred to by whatever nomenclature, lease amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head ‘Profits and gains of business or profession’.
(2) It is a mixed question of law and fact and has to be determined from the point of view of a businessmen in that business on the facts and in the circumstances of each case, including true interpretation of the agreement under which the assets are let out.
(3) Where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same.
(4) If only a few of the business assets are let out temporarily while the assessee is carrying out his other business activities, then it is a case of exploiting the business assets otherwise than by employing them for his own use for making profit for that business; but if the business never started or has started but ceased with no intention to be resumed, the assets also will cease to be business assets and the transaction will only be exploitation of property by an owner thereof, but not exploitation of business assets - Universal Plast Ltd. v. CIT [1999] 103 Taxman 493/237 ITR 454 (SC).
From the decided cases the following principles emerge :
(1) In order to be a business income within the meaning of section 10 of the 1922 Act [corresponding to section 28 of 1961 Act], there must be evidence of exploitation of a commercial asset.
(2) Exploitation of a commercial asset does not necessarily mean exploitation by the assessee himself at all material times. The assessee may temporarily cause it to be exploited by another person against payment of consideration and for this purpose may also execute a lease for a fixed period even with clauses of option to renew.
(3) But in order that the income derived from the lease may be taxable it must be shown that the lessor’s intention was that during the period of the lease the asset leased out must remain and treated as a commercial asset and exploited as such.
(4) This intention of the lessor referred to above has to be ascertained from the cumulative effect of all the terms of the lease and other material circumstances - Everest Hotels Ltd. v. CIT [1978] 114 ITR 779 (Cal.).
12 September 2009
But my query is still unsolved..... In my case it is not a lease condition, the assessee is receiving rent from old tenant for the period when they left the bulding for reconstruction.
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