NON-REPORTABLE IN SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION Civil Appeal No.6437 of 2016 M/s. Rayala Corporation Pvt. Ltd. ... Appellant(s) VS. Assistant Commissioner of Income Tax ... Respondent(s) WITH Civil Appeal No.6438 of 2016 WITH Civil Appeal Nos.6439-6440 of 2016 WITH Civil Appeal No.6441 of 2016 JUDGMENT Anil R.Dave, J. 1. Being aggrieved by judgment delivered by High Court of Madras on 4th October, 2013 in Tax Case (Appeal) Nos.91, 99 and 212 of 2012; and 230 and 231 of 2007, these appeals have been filed. 2. issue involved in all these appeals is common Signature Not Verified Digitally signed by SARITA PUROHIT but it pertains to different Assessment Years and Date: 2016.08.11 17:10:58 IST Reason: therefore, all these appeals had been heard together. 1 facts in all these appeals, in nutshell are as under: appellant-assessee, private limited company, is having house property, which has been rented and assessee is receiving income from said property by way of rent. main issue in all these appeals is whether income so received should be taxed under head Income from House Property or Profit and gains of business or profession . reason for which aforestated issue has arisen is that though assessee is having house property and is receiving income by way of rent, case of assessee is that assessee company is in business of renting its properties and is receiving rent as its business income, said income should be taxed under Head Profits and gains of business or profession whereas case of Revenue is that as income is arising from House Property, said income must be taxed under head Income from House Property . 3. learned counsel appearing for assessee submitted that issue involved in these appeals is no more res integra as this Court has decided in case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if assessee is having his house property and by way of business he is giving property on rent and if he is receiving rent from said property as his business income, said 2 income, even if in nature of rent, should be treated as Business Income because assessee is having business of renting his property and rent which he receives is in nature of his business income. 4. According to learned counsel appearing for assessee, afore-stated judgment in case of Chennai Properties (supra) has referred to all judgments on subject and more particularly, judgment in case of Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC) which has summed up as under:- As has been already pointed out in connection with other two cases where there is letting out of premises and collection of rents assessment on property basis may be correct but not so, where letting or sub-letting is part of trading operation. dividing line is difficult to find; but in case of company with its professed objects and manner of its activities and nature of its dealings with its property, it is possible to say on which side operations fall and to what head income is to be assigned. 5. learned counsel also submitted that assessee is private limited company and even as per its Memorandum of Association its business is to deal into real estate and also to earn income by way of rent by leasing or renting properties belonging to 3 assessee company. 6. learned counsel also drew our attention to fact that High Court and authorities below had come to specific finding to effect that assessee company had stopped its other business activities and was having only activity with regard to leasing its properties and earning rent therefrom. Thus, except leasing properties belonging to assessee company, company is not having any other business and said fact is not in dispute at all. 7. For afore-stated reasons, learned counsel submitted that impugned judgment delivered by High Court is not proper for reason that High Court has directed that income earned by appellant assessee should be treated as Income from House Property . 8. On other hand, learned counsel appearing for respondent-Revenue made effort to justify reasons given by High Court in impugned judgment. learned counsel also relied upon judgment delivered by this Court in case of M/s. S.G. Mercantile Corpn. (P) Ltd. v. CIT, Calcutta (1972) 1 SCC 465. According to him, important question which would arise in all such cases is whether acquisition of property for leasing and letting out all shops and stalls would be essentially part of business and trading operations of assessee. According to 4 learned counsel appearing for Revenue, leasing and letting out of shops and properties is not main business of assessee as per Memorandum of Association and therefore, income earned by assessee should be treated as income earned from House Property. He, therefore, submitted that impugned judgment is just legal and proper and therefore, these appeals should be dismissed. 9. Upon hearing learned counsel and going through judgments cited by learned counsel, we are of view that law laid down by this Court in case of Chennai Properties (supra) shows correct position of law and looking at facts of case in question, case on hand is squarely covered by said judgment. 10. Submissions made by learned counsel appearing for Revenue is to effect that rent should be main source of income or purpose for which company is incorporated should be to earn income from rent, so as to make rental income to be income taxable under head Profits and Gains of Business or Profession . It is admitted fact in instant case that assessee company has only one business and that is of leasing its property and earning rent therefrom. Thus, even on factual aspect, we do not find any substance in what has been submitted by learned counsel appearing for Revenue. 11. judgment relied upon by learned counsel 5 appearing for assessee squarely covers facts of case involved in appeals. business of company is to lease its property and to earn rent and therefore, income so earned should be treated as its business income. 12. In view of law laid down by this Court in case of Chennai Properties (supra) and looking at facts of these appeals, in our opinion, High court was not correct while deciding that income of assessee should be treated as Income from House Property. 13. We, therefore, set aside impugned judgments and allow these appeals with no order as to costs. We direct that income of assessee shall be subject to tax under head Profits and gains of business or profession . ................J. [ANIL R. DAVE] .................J. [L. NAGESWARA RAO] New Delhi; August 11, 2016. 6 ITEM NO.1A COURT NO.2 SECTION IIIA (For Judgment) S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No(s).6437/2016 @ SLP(C)NO.13114/2014 M/S RAYALA CORP. PVT LTD Appellant(s) VERSUS ASSISTANT COMMISSIONER OF INCOME TAX Respondent(s) WITH C.A.No.6438/2016 @ SLP(C)No.13121/2014 C.A.Nos.6439-6440/2016 @ SLP(C)Nos.13123-13124/2014 C.A.No.6441/2016 @ SLP(C)No.13132/2014 Date : 11/08/2016 These appeals were called on for pronouncement of Judgment today For Appellant(s) Ms. Radha Rangaswamy,Adv. For Respondent(s) Mrs. Anil Katiyar,Adv. UPON hearing counsel Court made following O R D E R Hon'ble Mr. Justice Anil R. Dave pronounced Non-Reportable judgment of Bench comprising His Lordship and Hon'ble Mr. Justice L. Nageswara Rao. appeals are allowed with no order as to costs in terms of signed Non-Reportable judgment. Pending application, if any, stands disposed of. (Sarita Purohit) (Indu Pokhriyal) Court Master Court Master (Signed Non-Reportable judgment is placed on file) 7 M/s. Rayala Corporation Pvt. Ltd. v. Assistant Commissioner of Income-tax