Commercial asset leasing can still produce business income where the asset is temporarily let without abandonment of the business.

Temporary leasing of a cinema theatre and its equipment, when those assets remained commercial assets used in the assessee's business of exhibiting motion pictures, was treated as a mode of carrying on business and not as abandonment of the business. The length of the lease, including an option to renew, was not decisive; the controlling question was whether the asset had merely been exploited as a business asset or had been converted into an ordinary investment yielding rent. On the stated facts, there was no sufficient basis to treat the asset as so converted, so the lease income was assessable as business income under section 10 of the Income-tax Act, 1922, not as income from other sources under section 12.

---

---

Issues: Whether the income derived by leasing out the cinema theatre and its equipment was assessable as business income under section 10 of the Income-tax Act, 1922, or as income from other sources under section 12 of the Act.

Analysis: The cinema theatre and its equipment were commercial assets of the assessee, used in its business of exhibiting motion pictures. Temporary letting of such a commercial asset to another person for the same business purpose does not, by itself, show abandonment or discontinuance of the assessee's business. The duration of the lease, even though for five years with an option to renew, was not ative by itself; what mattered was whether the asset was merely being exploited as a business asset or had been finally converted into an ordinary investment yielding rent. On the facts, there was no sufficient circumstance showing that the assessee had ceased its business activity or ceased to hold the theatre as a commercial asset.

Conclusion: The income from the lease was business income chargeable under section 10 of the Income-tax Act, 1922, and not income assessable under section 12. The assessee succeeded on the first question referred; the second question did not arise.

Ratio Decidendi: Letting out a commercial asset temporarily for use in the same business is a mode of carrying on business and yields business income unless the facts show abandonment of the business or conversion of the asset into a mere source of rent.

---