Lease rentals received by the BIFR hooked taxpayer for leasing total business assets/ manufacturing plant under a rehabilitation scheme are classified as business income vide (2021) 439ITR346 in Premier Tyres Case(PTL).
The assessee who carried business losses in its returns earned lease rentals which the revenue taxed them as income from other sources denying a set off against business losses alleging that the transaction of lease is a mere instance of assets exploitation as owner of properties rather than as exploitation of business assets case. What mattered at the end in this case is that it was a close ended agreement for 8 years only for running the same business ( Tyres manufacturing by the lessee) and that the object of lease was to address the business problems/ business losses and to make PTL viable in long run.
Eventually therefore it is expected of the revenue to see through their prism the bottom line or the purpose or for that matter commercial implications of any given rental/lease arrangement to decide whether to tax it as business income or as income from other sources especially when it involves exploitation of commercial
/ business assets as according the High Court denying eligible deductions or expenses treating business activity as any other activity is an illegal act.