Commissioner of Income Tax vs M.A. Sathar (P.) Ltd.

K.A. Thanikkachalam J.

In pursuance of the directions given by this court in T.C.P. Nos. 361 and 362 of 1980, the Tribunal referred the following question for the opinion of this court u/s 256(2) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 22 of the Act, the Appellate Tribunal was right in holding that no income from property at No. 54 Arch Bishop Mathias Avenue should be assessed in the assessee''s hands ?

The assessee is a private limited company. The assessee shifted its registered office from door No. 48/4, Poes Garden, Madras, to door No. 54, Arch Bishop Mathias Avenue, Madras. The office of the company was located in one of the rooms and the rest of the building was occupied by the managing director-cum-general manager, free of rent since it was authorised by the board of directors in the meeting held on July 10, 1972. For the assessment year 1973-74, the assessee-company filed a return claiming loss of Rs. 86,183 from the business. The Income Tax Officer finding that the property was not used for the purpose of the assessee''s business and that the property was used by the managing director for his residence held that the income from the property should be assessee in the hands of the assessee. Accordingly, the Income Tax Officer computed the annual letting value of the property at Rs. 36,000. The Appellate Assistant Commissioner held that the property in question had been used by the assessee only for the purpose of business and hence the notional income therefrom could not be brought to tax. On the Department''s appeal to the Tribunal, the Tribunal held that the income derived by the company by letting out its property to its employees is incidental to the business carried on by it and has to be considered as income from business. This was also the view taken by this court in Commissioner of Income Tax Vs. New India Maritime Agencies P. Ltd., . Inasmuch as the order passed by the Tribunal for both the assessment years under consideration is in accordance with the above cited decision of this court, we answer the question referred to us in the affirmative and against the Department. No costs.