Section 28(i)

Section 28(i) — the law in short

What the courts have decided on section 28(i), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Chennai Properties and Investments Ltd v CIT Supreme CourtHelps taxpayer
  My company's whole business is acquiring properties and letting them. Is the rent business income or house property income?
  Business income, on these facts. Where the company's main object is to acquire and hold properties and let them out, and that is the activity it actually carries on, the rent is assessable under s.28 and not under s.22. The Court warned that the object clause is not by itself determinative - what matters is what the company in fact does.
• Sutlej Cotton Mills Ltd v CIT Supreme CourtCuts both ways
  The rupee moved and I have a gain on foreign currency. Is that trading income or a capital receipt?
  It depends on what the currency was doing in the business, not on the size or direction of the currency movement. If the foreign currency was held on revenue account, as a trading asset or as part of the circulating capital of the business, the profit or loss is a trading profit or loss. If it was held as a capital asset or as fixed capital, the profit or loss is of a capital nature.
• Sultan Brothers P Ltd v CIT Supreme CourtHelps taxpayer
  I let a building together with its furniture and fittings under one agreement. Is that rent house property income?
  It depends, and the Supreme Court refused to lay down a formula. Whether a particular letting is a business is decided on the circumstances of each case, and whether the building and the plant, machinery or furniture are inseparably let turns on the intention of the parties - whether the two were meant to be enjoyed together and whether one would have been let without the other.
• Dr Mathew Cherian v ACIT High CourtHelps taxpayer
  I'm a consultant doctor at a hospital. Can the AO reopen and tax my fees as salary?
  Not on this material. The Madras High Court set aside the s.148A(d) order and s.148 notice: the contracts showed professional autonomy, a variable fee tied to patient volume, no statutory employment benefits and freedom to practise privately, so there was no information suggesting escapement of income.
• CIT v Gundecha Builders High CourtHelps taxpayerNo later treatment found
  I let out the unsold part of my project. Is that rent business income or house property?
  Income from house property. The developer's business was constructing and selling, not letting, so letting the unsold portion pending sale was incidental to the business and the rent was the fruit of ownership, assessable under s.22 rather than s.28(i).
• Commissioner of Income-Tax v Shambhu Investment Pvt Ltd High CourtHelps department
  I let furnished table space with security, electricity, water and common amenities for a single monthly charge. Is that business income or income from house property?
  Income from house property, on these facts. The Calcutta High Court held that the mere attachment of income to immovable property is not by itself decisive; what must be seen is the assessee's primary object in exploiting the property. If the main intention is to let the property or a portion of it, the receipt is rental income; if it is to exploit the property by way of complex commercial activities, it is business income. Here there was no separate charge or agreement for furniture, fixtures or services, the monthly rent was comprehensive, and interest-free security advances of Rs 4,25,000 had already recovered the whole cost of the let portion. Applying the Sultan Brothers tests, the letting was inseparable and the object was letting.
• Sesa Goa Ltd v JCIT High CourtHelps taxpayerOverruled
  The Tribunal disallowed my education cess. Does s.40(a)(ii) actually cover cess?
  The High Court said no — s.40(a)(ii) as enacted contains no reference to 'cess' and there is no scope to read one in, so education and secondary cess were deductible, and the claim could be entertained even though it was not made in the original return. The Supreme Court reversed that order.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.