On deciding the legal issue as to whether income from letting of properties is assessable as "business profits" or as "Income from house property",
Supreme Court in the case of Chennai Properties & Investments Ltd. Vs. CIT has laid down certain tests:
A. Each case to be looked at from a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner.
B. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore, it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on.
C. A mere entry in the object clause showing a particular object would not be the determinative factor to arrive at a conclusion that the income is to be treated as income from business. Such question would depend upon the circumstances of each case, viz., whether a particular business is letting or not.
D. Where there is letting out of premises and collection of rents, the assessment on property basis may be correct but not so if the letting or sub-letting is part of a trading operation.
Hence, the diving line may be difficult to find but if the company has laid down its objects and the manner of its activities and the nature of its dealings with such property, it would be possible to say on which side the operations fall and to what head the income is to be assigned.
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