The central legal point established in the judgment is the need for clear findings on ownership of the building and the exploitation of the property by the owner before assessing rental income as income from house property under Section 22 of the Income Tax Act.

P.D. Dinakaran, J.

The above appeal is directed against the order dated 19.5.2003 made in I.T.A.No.1633/Mds/95 on the file of Income Tax Appellate Tribunal, Madras 'A' Bench.

2.1. In brief, aggrieved by the assessment order dated 3.2.1995, assessing the rent from two sister concerns, viz. Chemplast & Overseas Sanmar Financial Corporation, under the head "income from house property", in spite of the request made by the respondent/assessee for assessing the receipts of the rent under the head "profits and gains of business and for depreciation thereto", the respondent/assessee preferred an appeal before the Commissioner of Income Tax, who, by his order dated 17.5.1995, directed the Assessing Officer to assess the income derived from the building under the head "profits and gains of business", paving way for an appeal to the Tribunal by the revenue.

2.2. The Income Tax Appellate Tribunal, by order dated 19.5.2003, holding that there is no infirmity in the order of the appellate authority directing the Assessing Officer to assess the income derived from the building under the head "profits and gains of business", instead of "the income from house property" as claimed by the appellant/revenue, dismissed the appeal. Hence, the present appeal.

3. The above appeal was admitted by this Court on the following substantial question of law, viz.

"Whether in the facts and circumstances of the case, the appellate Tribunal was right in holding that the income from letting out of building is assessable as business income?"

4.1. According to the learned counsel for the appellant/revenue, as per Section 22 of the Income Tax Act (hereinafter referred to as the "Act"), any income from letting out of a building has to be assessed under the head income from house property, and therefore, the income of the respondent/assessee is liable to be assessed as an income from house property.

4.2. In support of the above contention, the learned counsel for the appellant/revenue places reliance on the decision in C.I.T. v. CHENNAI PROPERTIES & INVESTMENTS LTD. (266 ITR 685) and contends that the respondent/assessee, as owner of the building, is only exploiting the property by leasing out the same and realising income by way of rent and such rental income was liable to be assessed under the head "Income from house property".

5.1. Per contra, learned counsel appearing for the respondent/assessee, strongly placing reliance on the decision of this Court dated 26.11.2002 made in T.C.Nos.43, 80 & 81 of 1999 (THE COMMISSIONER OF INCOME TAX, CENTRAL II, MADRAS v. M/s. SANMAR HOLDINGS LTD., MADRAS), contends that unless there is a clear finding that the respondent/assessee is the owner of the building in question and that the respondent/assessee is trying to exploit the property as the owner by leasing out the same and realising by way of rent, the decision in C.I.T. v. CHENNAI PROPERTIES & INVESTMENTS LTD. (266 ITR 685), is not applicable to the instant case.

5.2. It is further argued that, as held in C.I.T. v. V.S.T. MOTORS P. LTD. (226 ITR 155), the fundamental position, viz. whether a particular building is a commercial asset or a house property has to be ascertained before the rental income is being assessed on the assessee.

5.3. It is also brought to our notice that following the decision in C.I.T. v. V.S.T. MOTORS P. LTD. (226 ITR 155), this Court, in T.C.Nos.43, 80 & 81 of 1999 (THE COMMISSIONER OF INCOME TAX, CENTRAL II, MADRAS v. M/s. SANMAR HOLDINGS LTD., MADRAS), finding that the Tribunal has failed to go into such factual question, set aside the order and remitted the matter for fresh consideration.

6. We have given careful consideration to the submissions of both sides.

7.1. It is apt to refer Section 22 of the Act, which reads as follows:

"Section 22: Income from house property. - The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may