Rent from Leave & License of office premises taxable as business profits

The assessee, carrying on business of import and sale of scientific instruments, purchased premises at Nariman Point, Mumbai in 1982 and had its regional office there. In November 1987, the assessee gave the property on leave and licence basis to Citibank pursuant to which it received rental income which it offered to tax as business profits. The AO assessed the said rental as Income from house property. The CIT (A) reversed the AO and held the rental assessable as business profits. The Tribunal reversed the CIT (A). On appeal by the assessee to the High Court, HELD reversing the Tribunal:

In Universal Plast Ltd 237 ITR 454 (SC) tests were laid down as to when income from property is assessable as business profits and as income from house property. Applying these tests, the rental income has to be assessed as business profits because (i) all assets of the business were not rented out by the assessee and it continued the main business of dealing in scientific apparatus etc, (ii) the property was being used for the Regional Office and was let out by way of exploitation of business assets for making profit, (iii) the assessee had not sold away the properties or abandoned its business activities. The transaction was a commercial venture taken in order to exploit business assets and for receiving higher income from commercial assets.