HARIKRISHNA FAMILY TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'C, has referred the following three questions at the instance of the assessee applicant under Section 256(2) of the IT Act, 1961 (the Act): 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the rental income earned by the assessee trust was 'income from business' and not 'income from house property' or 'income from other sources' ?

(2.) WHETHER , on the facts and circumstances of the case, the rental income from the hire of the building is taxable as 'income from other sources' or 'income from house property' or 'income from business' ?

(3.) DURING de novo assessment pursuant to order under Section 263 of the Act, the AO, after making detailed inquiry, held that the assessee trust was not the owner of the property and hence the income could not be assessed as 'income from house property' under Section 22 of the Act. It was further held that the owner had carried out day to day supervision of the construction work of rest of the portion to ensure maximum economy; the trust was created for specific purpose of leasing out the property with the intention to sub -let in order to earn profit; the entire arrangement appeared to be contrived one to divert the income from the hands of the co -owners to the dependents through the medium of the trust; and hence, income derived by the assessee trust in the form of rental income was taxable under the head 'Income from profits and gains of business or profession'. In support of the proposition, reliance was placed on the apex Court's decision in the case of S.G. Mercantile Corporation (P) Ltd. v. CAT : [1972]83ITR700(SC) .