MANGLA HOMES (P) LTD Vs. ITO

JUDGEMENT

(1.) This appeal is filed by the assessee taking exception to an order passed by the Income Tax Appellate Tribunal, Mumbai branch dismissing the appeal directed against the order passed by the Commissioner of Income Tax (Appeals).

(2.) According to the appellant is a private limited company incorporated with the objection of dealing in properties. The main object of the company as contained in the memorandum of association was to carry on business of dealing and investment in properties, flats, warehouses, shops, commercial and residential houses. The ancillary object was to carry on business of leasing, hire purchase, renting, selling, reselling or otherwise dispose of all forms of moveable or immovable properties and assets including buildings, godowns, warehouses and real estate of any kind. The assessee purchased flats for trading purposes at the cost of Rs.4 crores. At the time of purchase the building needed major repairs and according to the assessee as it expected that the prices of flats would go up after completion of repairs it made the purchases. It is then claimed by the assessee that the flat could not be sold because of recession in the market and hence it let out the flats on license basis for temporary period and earned monthly rental income as license fees. The assessee treated the said rental income as income from the business. The authorities below have concurrently found in favour of the revenue that the rental income cannot be treated as income from business and treated it as "income from house property" under section 22 of the Income Tax Act.

(3.) The question thus raised is as to whether the Tribunal is right in so concluding that the rental income is an income from house property. While reaching the said conclusion the Tribunal has relied on a judgment reported in the case of East India Housing and Land Development Trust Ltd. V/s Commissioner of Incometax, West Bengal, 42 ITR 49 (SC). In the said judgment in an identical set of facts with the assesseecompany having objects amongst others was