While quashing an ITAT order, the Kerala High Court ruled that income received from licensing a Property is taxable as Business Income under the provisions of the Income Tax Act, 1961.
The assesse, given its hotel along with its furnishings and equipment’s on license M/s Abad Motels and Resorts Private Limited for a period of seven years. While filing income tax return for the year under consideration, the assesse disclosed the license fee received from the above license under the head “income from business”. However, the assessing Officer brought the same under the head income from house property.
Though the first appellate authority granted relief to the assesse, the Tribunal restored the order of assessment.
Allowing the appeal filed against the Tribunal order, the High Court relied upon the judgment of Apex Court in Sultan Brothers Pvt. Ltd. v. CIT wherein a similar issue was answered in favour of the assesse.
The division bench comprising Justice Antony Dominic and Justice Dama Sheshadri Naidu clearly said that the intention of the parties as reflected in the agreement was to grant license in respect of a running hotel, the income of which can only be income from business.
Finally the court observed that the Commissioner of Income Tax was fully justified in setting aside the order of assessment and holding that the income of the assessee was income from business and not income from house property and found the order of Tribunal unsustainable.
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