CIT vs Karnataka State Warehousing Corporation

Heard.

Admit. By consent, heard for final disposal at the stage of admission.

The substantial questions of law raised in the present appeal reads thus:

''Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in holding that the warehousing rental charges received by the assessee is assessable under the head income from business and not under the head income from house property?''

The assessee-M/s. Karnataka State Warehousing Corporation is the government undertaking. It was established under the Warehousing Corporation Act, 1962. It had primarily been set up for the purpose of acquiring and building godowns and warehouses and letting them out for storage of certain notified commodities. Admittedly, the Assessee-Company has numerous warehouses spread across the State of Karnataka. Some of the warehouses have been taken on rent and let out to the companies/farmers for storage purposes. It is in this backdrop, we have examined the substantial questions of law in the light of the judgment of this Court in Commissioner of Income Tax-III Vs. Velankani Information Systems (P.) Ltd., . In this case, some what similar facts and circumstances had arisen for consideration. The Division Bench of this Court observed that ''if the intention is to exploit commercial property by putting up construction and letting it out for the purpose of getting rental income, then notwithstanding the fact that the furniture and fittings are provided to the lessee, the income from the building fall under the head Income from house property. But if the assessee is in the business of taking land, putting up commercial buildings thereon and letting out such buildings with all furniture as his profession or business, then notwithstanding the fact that he has constructed a building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the heading of income from house property. Therefore, firstly what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession. In fact, any other interpretation would defeat the very object of introduction of Section 80-IA as well as the scheme which is framed by the Government for development of industrial parks in the country.'' It is, thus, clear that the rental charges received by the assessee are assessable under the head income from business and not under home property.

In the circumstances, no substantial questions of law, as raised by the Revenue, in the present case arise for our consideration.

The appeal is accordingly dismissed.