{"id":3651,"date":"2011-09-08T15:27:18","date_gmt":"2011-09-08T09:57:18","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=3651"},"modified":"2011-09-08T15:27:18","modified_gmt":"2011-09-08T09:57:18","slug":"the-scientific-instrument-co-ltd-vs-cit-allahabad-high-court-rent-from-leave-license-of-office-premises-taxable-as-business-profits","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/the-scientific-instrument-co-ltd-vs-cit-allahabad-high-court-rent-from-leave-license-of-office-premises-taxable-as-business-profits\/","title":{"rendered":"The Scientific Instrument Co Ltd vs. CIT (Allahabad High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (scientific_property_rental_biz_profit.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nRent from Leave & License of office premises taxable as “business profits”
\n<\/strong><\/p>\n

The assessee, carrying on business of import and sale of scientific instruments, purchased premises at Nariman Point, Mumbai in 1982 and had its regional office there. In November 1987, the assessee gave the property on leave and licence basis to Citibank pursuant to which it received rental income which it offered to tax as “business profits<\/em>“. The AO assessed the said rental as \u201cIncome from house property<\/em>\u201d. The CIT (A) reversed the AO and held the rental assessable as \u201cbusiness profits<\/em>\u201d. The Tribunal reversed the CIT (A). On appeal by the assessee to the High Court, HELD reversing the Tribunal:<\/p>\n

In Universal Plast Ltd<\/a><\/strong> 237 ITR 454 (SC) tests were laid down as to when income from property is assessable as \u201cbusiness profits<\/em>\u201d and as \u201cincome from house property<\/em>\u201d. Applying these tests, the rental income has to be assessed as \u201cbusiness profits<\/em>\u201d because (i) all assets of the business were not rented out<\/strong> by the assessee and it continued the main business<\/strong> of dealing in scientific apparatus etc, (ii) the property was being used for the Regional Office and was let out by way of exploitation of business assets for making profit<\/strong>, (iii) the assessee had not sold<\/strong> away the properties or abandoned<\/strong> its business activities. The transaction was a \u201ccommercial venture<\/em>\u201d taken in order to exploit business assets and for receiving higher income from commercial assets.<\/p><\/blockquote>\n

\nSee also ITO vs. Shanaya Enterprises<\/a><\/strong> (ITAT Mumbai) where the entire law was considered\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In Universal Plast Ltd<\/a><\/strong> 237 ITR 454 (SC) tests were laid down as to when income from property is assessable as \u201cbusiness profits<\/em>\u201d and as \u201cincome from house property<\/em>\u201d. Applying these tests, the rental income has to be assessed as \u201cbusiness profits<\/em>\u201d because (i) all assets of the business were not rented out<\/strong> by the assessee and it continued the main business<\/strong> of dealing in scientific apparatus etc, (ii) the property was being used for the Regional Office and was let out by way of exploitation of business assets for making profit<\/strong>, (iii) the assessee had not sold<\/strong> away the properties or abandoned<\/strong> its business activities. The transaction was a \u201ccommercial venture<\/em>\u201d taken in order to exploit business assets and for receiving higher income from commercial assets<\/p>\n

Read more ›<\/a><\/div>\n

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