Practical Insight: If you own a commercial property but are not actively running the business and have leased out the property to another party for handling the operations, the income may be taxable under “Income from Other Sources,” with limited deductions under Section 57, regardless of how the agreement is titled.

Related Case Law: In East West Hotels Ltd. v. DCIT (2009), the Karnataka High Court clarified that income must be classified based on the real nature of the arrangement, not merely on the wording used in the contract.

Although the agreement was described as a “license,” the Court noted the long tenure, profit-linked payments, lack of the owner’s operational involvement, and the effective transfer of commercial rights. On these facts, the arrangement was treated as similar to a lease, and the income was accordingly taxed under “Income from Other Sources” instead of business income.

*Disclaimer: The information on this website is for general guidance only and does not constitute professional advice. Please consult a qualified professional before acting on it.