Commercial asset status determines that rent from a connected, owner operable asset constitutes business income taxable under the Act.

An asset funded from capital employed in an existing business and capable of being worked by the owner that is connected with that business qualifies as a commercial asset; where such an asset is so connected, income derived from letting it out is income of the business under the statutory definition of business and thus taxable under the Excess Profits Tax Act. The note emphasises the capital source and owner operability tests and distinguishes mere sterilised or temporarily unused assets from commercially connected assets, applying the principle that exploitation by letting does not alter business character.

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Issues: (i) Whether, on the facts and circumstances of the case, the oil mill constructed by the assessee is a commercial asset; (ii) Whether the income arising from letting out the oil mill is income from business within the meaning of section 2(5) of the Excess Profits Tax Act and therefore taxable under that Act.

Issue (i): Whether the oil mill is a commercial asset.

Analysis: The court considered the factual findings that funds for setting up the oil mill came from capital employed in the assessee's flour mill business, there was no incapacity preventing the assessee from operating the oil mill, and the assessee subsequently ran the oil mill himself. The court noted the unusual character of establishing a regular oil mill purely as an investment to earn rent and the affinity between the flour mill business and the oil mill. Prior authorities distinguishing sterilised assets and temporary non-user were considered.

Conclusion: The oil mill is a commercial asset.

Issue (ii): Whether income from letting out the oil mill is income from business under section 2(5) of the Excess Profits Tax Act.

Analysis: Having concluded the oil mill to be a commercial asset used in connection with the assessee's business and noting that its establishment constituted an expansion of the flour mill business using business capital, the court applied the statutory definition of "business" in section 2(5) of the Excess Profits Tax Act. The court relied on precedent holding that income yielded by a commercial asset capable of being worked by the owner is income of the business whether exploited directly or let out, distinguishing situations where an asset has ceased to be a commercial asset.

Conclusion: The income from letting out the oil mill is income from business within the meaning of section 2(5) of the Excess Profits Tax Act and is taxable under that Act.

Final Conclusion: The court affirms that the oil mill is a commercial asset connected with the assessee's business and that income from its letting out during the relevant periods constitutes business income liable to tax under the Excess Profits Tax Act.

Ratio Decidendi: Where an asset is funded from capital employed in an existing business, is capable of being worked by the owner and is connected with that business, income yielded by that commercial asset-whether by direct use or by letting out-is income of the business within section 2(5) of the Excess Profits Tax Act.

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