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Issues: (i) Whether the income from leasing of the assessee's jute mill was assessable under section 28 of the Income-tax Act, 1961 and not under section 56 of the Income-tax Act, 1961. (ii) Whether Rs. 15,000 paid to an ex-employee was admissible as a deduction in computing the assessee's income from the leasing out of the jute mill.
Issue (i): Whether the income from leasing of the assessee's jute mill was assessable under section 28 of the Income-tax Act, 1961 and not under section 56 of the Income-tax Act, 1961.
Analysis: The question was covered by an earlier decision in the assessee's own case for the preceding assessment year. On that basis, the leasing income was treated as business income chargeable under section 28 rather than as income from other sources under section 56.
Conclusion: The issue was answered in the affirmative and in favour of the assessee.
Issue (ii): Whether Rs. 15,000 paid to an ex-employee was admissible as a deduction in computing the assessee's income from the leasing out of the jute mill.
Analysis: Since the income was held assessable under section 28, the associated expenditure had to be considered on business principles. The allowance depended on whether the liability was ascertained within the relevant accounting period, and on that footing the amount was deductible.
Conclusion: The issue was answered in the affirmative and in favour of the assessee.
Final Conclusion: Both referred questions were decided in favour of the assessee, and the assessee succeeded on the tax treatment of the leasing income as well as on the deduction claim.
Ratio Decidendi: Where lease income is held to fall under the head of business income under section 28, related expenditure incurred on an ascertained liability during the relevant accounting period is allowable as a business deduction.
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