HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Karnani Properties Ltd. v. Commissioner of Income Tax, West Bengal
Civil Appeals Nos. 1874 and 1875 of 1968
[1972] 1 SCR 457 ·
Indian Income-tax Act, 1922: sections 9, 10, 12 and 66
Sources & disclosures includedDownload original judgment / order
2-judge bench · K. S. Hegde, J. · A. N. Grover, J.
Assessment years: 1956-57, 1957-58
01 · Facts of the case
Karnani Mansion contained residential flats and shops. The company supplied electricity through its own power house, hot and cold water, lifts and other amenities using permanent staff. The Income-tax Officer divided receipts between property rent and other-source income. Only classification of the service component remained disputed on appeal. The Tribunal treated it as business income; the High Court reappraised the evidence and treated it as property income.
Source: SCR pp. 459-460 / PDF pp. 3-4
02 · Discussion by the Hon’ble Court
The correctness of the Tribunal’s factual findings had not been challenged through the referred question. The High Court therefore had to apply law to those findings, not replace them. On the accepted facts, continuous, organised and profit-oriented services constituted business activity. The Court expressly avoided a general rule requiring every consolidated rent to be split, or separately taxing the several activities of a single business. It also left factual reconsideration in future assessments open.
Source: SCR pp. 461-464 / PDF pp. 5-8
03 · Judicial decision
Both appeals succeeded. The High Court’s answer was discharged and the referred question was answered affirmatively in favour of the assessee. Costs were awarded with one hearing fee.
Source: SCR p. 464 / PDF p. 8
04 · Outcome / in whose favour
In favour of the assessee on the disputed service income, based on binding unchallenged facts. The already assessed property-rent component was not the subject of the dispute; the Court did not declare every composite letting to yield separate business income.
Source: SCR pp. 460-464 / PDF pp. 4-8
05 · AKHB REVIEW POINT
AKHB analysis: distinguish the agreed property-rent treatment from the contested service component. Preserve lease terms, service accounts, staffing and operating arrangements, and frame any challenge to factual findings through the appropriate procedural question. Avoid turning this fact-bound reference decision into a universal rental-income classification rule.
Source: AKHB analysis based on SCR pp. 460-464 / PDF pp. 4-8
Source & verification
Download original judgment / order · Open cited source rendition
Full 8-page SCR report read, separating editorial headnote from judicial reasoning; no neighbouring case text used.
- Full source read; page pinpoints used because judgment paragraphs are unnumbered. Exact original bytes match the catalogue SHA-256.
- SCR p.459 first identifies calendar years 1955 and 1956, but later labels receipt figures as accounting years 1956 and 1957. The assessment years are consistently 1956-57 and 1957-58. The inconsistent receipt-year labels are not silently corrected or relied on.
Statutory scope
This decision applies the Indian Income-tax Act, 1922 to the stated historical assessment years. Current statutory applicability and any Income-tax Act, 1961 or 2025 crosswalk are not determined.
Later treatment
Source checked 2026-10-10. Comprehensive subsequent treatment has not been verified; no current citator clearance is represented.
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