N.V Balasubramanian, J.:— At the instance of the assessee, the Income-tax Appellate Tribunal has stated a case and referred the following two questions of law for our consideration:
“1. Whether, on the facts and in the circumstances of the case, the profit estimated by the assessee on contracts in foreign exchange is includible in the total income of the assessee?
2. Whether, on the facts and in the circumstances of the case, the rent received by the assessee from the tenants of the business premises could be assessed as income from business?”
2. The first question of law referred to us related to the assessment years 1974-75 and 1975-76.
3. The assessee is a banking company wholly owned by the Government of India. The assessee had shown in his accounts, an estimated profit of Rs. 21,81,464 and Rs. 39,61,552, respectively, on contracts in foreign exchange. The Income-tax Officer assessed the same as part of the total business income of the assessee. The Commissioner of Income-tax (Appeals) held that for an earlier assessment year, the Income-tax Appellate Tribunal allowed the loss on a similar transaction as revenue loss and following the earlier order of the Appellate Tribunal, he upheld the assessment of profit under the head “Business”. The Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). The assessee has questioned the order of the Income-tax Appellate Tribunal.
4. Mr. R. Meenakshisundaram, learned counsel for the assessee, brought to our attention an earlier judgment of this court in the case of the same assessee reported in Indian Overseas Bank v. Commissioner Of Income-Tax., [1990] 183 ITR 200, wherein this court held that the notional profit arrived at on the basis of the rate of exchange which prevailed on the last day of the accounting year, without an actual settlement of the forward contracts in foreign exchange did not represent the income of the assessee and the notional profit could not be subjected to tax.
5. Learned counsel for the Revenue, in his fairness, did not dispute the position that the earlier decision of this court in the case of the assessee in Indian Overseas Bank v. Commissioner Of Income-Tax., [1990] 183 ITR 200. would apply and following the earlier judgment of this court, we hold that the Tribunal, was not correct in its view that the estimated profit of the assessee on contract of foreign exchange was liable to be included as part of the total income of the assessee. Accordingly, we answer the first question of law referred to us in the negative and in favour of the assessee and against the Revenue.
6. The second question relates to the assessment year 1975-76. The Income-tax Officer added an amount of Rs. 4,69,867 as income from the property. The claim of the assessee before the Income-tax Officer was that a portion of its property was let out to its constituents and to tenants who had close business connection and, therefore, the rental income should be assessed under the head “Income from business”. The Income-tax Officer rejected the claim which was upheld by the Commissioner of Income-tax - (Appeals). The assessee filed an appeal before the Income-tax Appellate Tribunal which turned out to be unsuccessful.
7. Learned counsel for the assessee strongly placed reliance on a decision of the Madhya Pradesh High Court in the case of CIT v. National Newsprint and Paper Mills Ltd., [1978] 114 ITR 388 and submitted that the intention of the assessee was to carry on business more efficiently and, therefore, the income from a portion of its buildings let out should be regarded as “business income”. It is seen that the rent was received by the assessee by letting out a portion of the property owned by it and it is not the business of the assessee to let out its property or a portion of its property. The business of the assessee is banking and the business connection between the tenants and the assessee had nothing to do with the banking operations carried on by the assessee. The decision of the Madhya Pradesh High Court on which strong reliance has been placed by learned counsel for the assessee has no application as in this case, it was found that the accommodation was let out to the Government and other concerns because the mill was set up in a place where there were no facilities and the buildings were given on rent. The functioning of the bank and governmental agencies in a nearby place was essential for running of the business of the assessee with whom the assessee had daily transactions. Hence, the decision of the Madhya Pradesh High Court on which reliance was placed is distinguishable.
8. Further, we are also not able to accept the submissions made on behalf of the assessee and we are not in agreement with the view expressed by the Madhya Pradesh High Court. Under the provisions of the Income-tax Act, each head of income is separate and distinct and if certain income of the assessee falls under a particular head, it is not possible for the assessee to take the income from one head of income to another head. Admittedly, the income from the letting out of the property is assessable only under the head “Income from house property” and it is not open to the assessee to claim that it should be assessed under the head “Income from business or profession”. On the facts and circumstances of the case, it is clear that there was no link between tenants and the business carried on by the assessee. The business carried on by the assessee is banking business and it has nothing to do with the letting out of a portion of the property owned by it. We, therefore, hold that the Tribunal has come to the right conclusion in holding that the income from the property let out to its constituents cannot be regarded as income from business. Since there was no nexus between the business carried on by the assessee and the letting out of a portion of the assessee's building; the income was rightly assessed under the head “Income from house property”.
9. We do not find any infirmity in the order of the Appellate Tribunal in so far as it held that the house property income should be assessed under the head “Income from house property”, and accordingly, we answer the second question of law referred to us in the negative and against the assessee and in favour of the Revenue. No costs.