Commissioner of Income Tax vs New India Maritime Agencies P. Ltd.

Rangarajan, J.—The question referred in this case is as follows :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the property situate in 1-C, Nungambakkam High Road, Madras, which belonged to the assessee and used by the directors of purposes of residence, should be treated as used for purpose of the business within the meaning of section 22 of the Income Tax Act, 1961, and accordingly in deleting the income assessed under the head ''Property'' for the assessment year 1971-72 ?"

The admitted facts are : The assessee-company owns a residential house which was given rent-free for the occupation of its directors to be used as residence. The Appellate Tribunal found that such user of the house property comes under the business use and, therefore, the notional income from such property need not be assessed u/s 22 of the Act. The contention of the Revenue is that such use should be disregarded and the income from the property should be assessed as "income from the house property" because the assessee-company is the owner of the house property.

We find that a similar contention has been rejected by the Andhra Pradesh High Court in the case of Commissioner of Income Tax Vs. Vazir Sultan Tobacco Co. Ltd., . It is obvious that when the company gives the house as residence to its director, it was doing so only in the course of its business. The principle is that if the owner of a property carries on business with a property owned by him, the income from that property must be assessed as only income from business. In the present case since the Appellate Tribunal held that the house property is used by the company only as a part of the business and treated as a business, the finding of the Tribunal that the income from that property cannot be assessed separately as the income from the house property and included in the assessee''s total income is correct. We accordingly answer the question in the affirmative i.e., against the Revenue. No costs.