Tax relief for leasing companies
If a company’s only income is from leasing property, it should be taxed under the provision ‘ profit and gains of business or profession’ and not under the head ‘ income from house property’, the Supreme Court has ruled in its judgment, Rayala Corporation Ltd vs Asst Commissioner. In this case, the company leased its property and said even if its income was in the nature of rent, it should be treated as business income, because it is in the business of renting property, and the only income received is in the nature of business. It further said it is a private limited company and, according to its memorandum of association, its business is to deal in real estate and earn income by renting its properties. On the other hand, the income tax assessing officer and the Madras High Court maintained that it was earning income from house properties. The Supreme Court set aside the high court judgment and accepted the company’s argument.
Business Standard New Delhi, 22th August 2016