The ownership of the property must be established before assessing rental income as income from house property under Section 22 of the Income Tax Act, 1961.

(Appeals under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench dated 24.11.2004 in ITA Nos.2913, 2914 & 2915/Mds/1988 for the assessment years 1984-85 to 1986-87 respectively.)

P.D. Dinakaran, J.

The above tax case appeals are directed against the orders of the Income-tax Appellate Tribunal in ITA Nos.2913, 2914 & 2915/Mds/1988 respectively dated 24.11.2004, raising the following substantial question of law.

"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?"

2. The brief facts of the case are stated as follows:

2.1. The assessee company offered the rental income of the building as business income on the ground that the income from letting out was to be treated as business income. One of the objects of the company is to carry on the business of dealers in shares, stocks, debentures, bonds, obligations, chits, securities and to purchase, take on lease or in exchange, hire or otherwise acquire and deal in any movable or immovable property. The assessee had constructed a building at No.8, Cathedral Road, Madras.

2.2. The assessee leased out the office space to two companies in the previous year relevant to the assessment year 1984-85. The other floors, as and when constructed, were leased out to other tenants in the subsequent years. The buildings are centrally air conditioned and also provided with lifts. As per the lease deed, the lease of the office building would be inclusive of the amenities and the rent was charged for the amenities also. Accordingly, the assessee claimed such rent derived from the said building and the amenities provided thereunder should be assessed as part of income from business. The Assessing Officer was of the view that the entire income from the property was assessable under the head "income from house property" under Section 22 of the Act.

2.3. The assessee preferred appeals before the Commissioner of Income Tax (Appeals), who, dismissed the appeals holding that the income from letting out of the building is nothing but an income from house property under Section 22 of the Act, as held by the Assessing Officer and accordingly confirmed the assessment orders.

2.4. On further appeals by the assessee, the Tribunal, by order dated 13.10.1993, after finding that the office space was let out along with amenities such as lift, centralised air condition etc. as part of the building, held that the income from letting out of the building is a business income, but not an income from house property.

2.5. Before rendering its finding, the Tribunal followed the decisions of the Supreme Court in Sultan Brothers V. Commissioner Of Income Tax (51 ITR 353) wherein it is held that inseparability is demonstrated by the intention to enjoy the building along with the amenities and therefore, the total income from the building has to be assessed only under one head and cannot be split into two and that the case has to be looked at the business man's point of view to find out whether the letting out of the building was a business or exploitation of the property by an owner.

2.6. That apart, the Tribunal also relied on the decision of the Apex Court in Karanpura Development Co. Ltd. V. Commissioner Of Income Tax (44 ITR 362) wherein the Apex Court observed that a company formed with a specific object of acquiring properties not with the view to leasing them as property but to selling them and turning them to account even by way of leasing them out as an integral part of its business, cannot be said to treat them as land owner, but as trader. It was further observed that the expression "turn them to account" would also include the transaction of lease also, because the essential object of the assessee was to derive profit from the properties and such income could be derived not only by sale, but also by renting them out.

2.7. Aggri