In Brief
Raj Dadarkar & Associates, a partnership firm, acquired a municipal market area under auction and sub-licensed shops and stalls to traders, collecting rent and service charges. The Income Tax authorities reclassified the income from 'business income' to 'house property income' based on the appellant's deemed ownership status under Section 27(iiib) of the Income Tax Act. The Supreme Court upheld this classification, holding that the appellant was a deemed owner through long-term leasehold rights, and the income was income from house property. The Court rejected the argument that sub-letting was the firm's business, finding no systematic organized activity of service provision separate from rent collection. The object clause in the partnership deed was not conclusive proof of business character.
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