Rental income from factory godowns taxed as house property where business had ceased and no referable question of law arose.

Rental income from factory godowns was held assessable as income from house property because the company's ginning and pressing business had completely ceased, some machinery had been sold, and there was no prospect of resumption. On those concurrent factual findings, the godowns could not be treated as commercial assets capable of business exploitation during the relevant year, so the receipt was not business income. As the dispute turned entirely on findings of fact, no referable question of law arose under section 256(2), and the request for reference was refused.

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Issues: Whether the rental income from letting out factory godowns was assessable as business income or as income from house property, and whether any referable question of law arose to justify a reference under section 256(2).

Analysis: The company had previously carried on the business of ginning and pressing cotton, but the factual findings recorded by the income-tax authorities and the Tribunal showed that the business had come to a complete stop after 1974, some machinery had been sold, and there was no prospect of resumption. On those concurrent findings, the godowns were not capable of being exploited as commercial assets when they were let out during the relevant assessment year. The legal principle governing commercial assets permits business character to continue only where the asset remains capable of commercial use; where business has ceased and the property is let as owner, the rental receipt is not business income. Since the controversy was concluded by findings of fact, no question of law arose for reference.

Conclusion: The rental income was correctly treated as income from house property and the request for reference under section 256(2) was rightly refused; the decision is against the assessee.

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