INCOME TAX CASE

Rayala Corporation Vs
Assistant Commissioner of IT

Presented by: sowmya.s

18MBA49
 Rayala Corporation Vs Assistant Commissioner of IT

Issue: A taxpayer in the business of renting of property

should offer income as “Business Income” or “Income from
house property”?

Facts of the case:

• he taxpayer is in the business of renting their 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”.
 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/her house property and as part of his/her
business he/she 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”.
Supreme Court decision :
In a case between M/s. Rayala Corporation Pvt. Ltd
vs. Assistant Commissioner of Income Tax, the
Supreme Court of India has declared that, Income
which was arises from Rent out business should be
taxed under Income from Business and not as Income
from house property.
Thank you…