Rental income from commercial premises is assessable as income from house property if the premises have lost their character as commercial assets and the rental income is merely the result of ownership.

Sachchidanand Jha, J.

1. These two references under Sec. 256(1) of the Income-tax Act, 1961, are at the instance of the Revenue. The question of law referred to this court for opinion is :

" Whether the Tribunal was correct in holding that the rental income of the assessee was liable to be assessed as business income ?"

2. The material facts are as follows :

The assessee had leased out a certain portion of the properties of Ramdas Oil Mills and Ramdas Industries for commercial purposes. It carried on the manufacturing and processing business which was closed about 35 years ago. In the course of time, the machinery was also sold out and the premises were let out to different parties for oil milling business. The quarters meant for the staff were also let out. The income accruing from the premises were all along shown and assessed as income from business. In the assessment years under reference, namely, 1976-77 and 1977-78, the assessee received, respectively, Rs. 1,35,505 and Rs. 1,05,480 as rent. This income, as usual, was claimed to be income from business. After deducting expenses of Rs. 57,692 and Rs. 33,964 the net income of Rs. 72,813 and Rs. 71,515 was returned under the head "Business income". The Income-tax Officer, however, found that as the business had been closed 35 years ago and the machinery, etc., also had been sold out and the premises too had been let out on rent, the income (from rent) was assessable under the head "Income from house property". The assessee appealed to the Commissioner of Income-tax (Appeals). The Commissioner accepted the contention of the assessee that the premises had not been let out for residential purposes rather it had been leased out for commercial purposes in which manufacturing business was being carried on and, thus, the income was a result of exploitation of commercial assets assessable as income from business and, accordingly, set aside the order of the Income-tax Officer. On appeal by the Department, the Income-tax Appellate Tribunal upholding the findings of the Commissioner further held that the premises being commercial assets of the assessee and having been used as such in the past and its income also having been assessed as business income in the past, the mere fact that some of the portions of the premises had not been utilised for the purpose of carrying on business cannot give rise to the conclusion that the assets had lost its character as commercial assets. According to the Tribunal, the staff quarters which are part of the premises and had been let out to different persons, also are commercial assets. The Tribunal, however, accepted the petition of the Department and made reference of the question of law quoted above.

3. It is not in dispute that not only the business which was being carried on by the assessee in the premises in question in the past, the income from which was being shown as business income, had been closed long time back, about 35 years ago, but the plant and machinery installed in the premises in connection with the business activities had also been sold out. It is also not in dispute that the premises including the staff quarters were let out to different persons and the income returned by the assessee in the assessment years in question were rental income from the premises. On these admitted facts it is to be seen whether the Tribunal erred in holding that income from the premises is business income of the assessee and not income from house property.

4. Income has been classified under different heads, such as, income from salaries, income from house property, income from profits and gains of business and profession, etc., in the Income-tax Act. It is well-settled that classification of income does not mean that there are as many taxes as there are heads of income. The income-tax is one tax on the aggregate of the income. It is also settled that where a particular income has been classified under a specific head, for example, income from in