The Commissioner of Income Tax vs Chennai Properties and Investments Ltd.

N.V. Balasubramanian, J.—The Income Tax Appellate Tribunal has stated a case and referred the following question of law for our

consideration u/s 256(1) of the Income Tax Act, 1961:

Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the rent receipts derived by the

assessee company from letting out of properties should be assessed under the head ''business'' thereby allowing the expenses incurred for letting

out of properties as business expenditure?

The assessment year involved in this case is 1987-88. The assessee is a company deriving, inter alia, rental income from the properties. In the

assessment proceedings for the said assessment year, the rental income derived by the assessee company was assessed under the head ''House

Property'', which was objected to by the assessee. The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals),

and the said authority allowed the appeal holding that the income from the property should be assessed under the head ''business''. The revenue

challenged the order of the Commissioner of Income Tax (Appeals) before the Income Tax Appellate Tribunal. The Appellate Tribunal followed

its own order rendered in assessee''s own case for the assessment year 1985-86 and held that the income derived from the property should be

assessed under the head ''business''. The Income Tax Appellate Tribunal, at the instance of the Revenue, has stated a case and referred the

question of law set out earlier.

It is stated by the learned Standing Counsel for the revenue that the order of the Income Tax Appellate Tribunal for the assessment year 1985-

86 along with other years was the subject matter of reference in Tax cases No. 95, 197 and 209 of 2000 and this Court in Commissioner of

Income Tax Vs. Chennai Properties and Investments Ltd., , held that the income derived from letting out the property should be assessed as

income from the ''House Property'' and not under the head ''business''. Following the same, we hold that the Tribunal was not correct in holding

that the rental income from the property should be assessed under the head ''Business'' as there is no dispute that the factual situation remains the

same as that of the earlier assessment years.

Consequently, we answer the question of law referred to us in negative - in favour of the Revenue and against the assessee. No costs.

Mr. P.P.S. Janardhana Raja, learned counsel for the assessee submits that the Supreme Court has granted Special Leave to appeal against the

judgment of this Court cited supra, in SLP No. 13876 of 2003 dated 23.07.2004 and seeks oral leave for the grant of certificate for leave to

appeal to Supreme Court. We find that the Supreme Court has already granted Special Leave to appeal against the judgment of this Court in the

case of Commissioner of Income Tax Vs. Chennai Properties and Investments Ltd., , which we followed in this judgment. Further, it is stated that

the appeal is pending before the Supreme Court, and also taking note of the fact that the points raised in the tax case are bound to recur in

subsequent assessment years as well, we grant the necessary leave to appeal to Supreme Court of India and also the certificate that this case is a fit

case for appeal to Supreme Court of India.