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Supreme Court in the case of Rayala Corporation Vs Assistant Commissioner of Income-tax

Taxpayer – A private limited company

Ruling authority – Supreme Court

Facts of the case:

  • The taxpayer is in the business of renting of its properties.
  • It is in receipt of rental income from such renting business.
  • It has been offering such income under the head “Income from Business”.
  • However, the tax authorities are of the view that such income must be offered as “Income from House Property”.

Question that needs to be answered

A taxpayer in the business of renting of property should offer income as “Business Income” or “Income from house property”?

Supreme Court observations :

  • Relied on its own earlier decision in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC). Here the court had observed that if a taxpayer is having his house property and as part of his business he is giving the property on rent, the rental income received should be treated as “Business Income” because the taxpayer is having a business of renting his property.
  • Based on the above, the court, in the case of Rayala Corporation, ruled that income from house property received where the taxpayer is into the business of letting out property will be taxed as “Income from Business” and not as “Income from House Property”.

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