Business asset let out as lease income remained business income, and sale surplus was taxable as profit.

Lease of a rice mill did not convert a business asset into mere property income where the assessee continued other business activity and the mill remained part of its commercial structure. The court applied the wide meaning of "business" and held that temporary letting of a business asset can still amount to exploitation of that asset in the course of business, rather than cessation of business use. On those facts, the lease income remained business income, and the excess of sale proceeds over written-down value was taxable as profit.

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Issues: Whether the lease income from the rice mill remained income from business so that the excess realised on sale of the building and machinery was taxable as profit under section 10(2)(vii) of the Income-tax Act, 1922.

Analysis: The expression "business" in section 2(4) is of wide import and covers a real, systematic commercial activity. A business asset does not cease to be such merely because it is temporarily let out or put to a substituted use. The decisive inquiry is whether, on the facts, the letting of the asset is part of the assessee's business activity or merely a lease of property. Here, the assessee continued other business activity and the rice mill itself was a commercial asset used in the assessee's business structure. The letting out of the mill was therefore an exploitation of a commercial asset and not a cessation of business.

Conclusion: The lease income continued to be income from business, and the excess of sale proceeds over written down value was taxable as profit under section 10(2)(vii). The answer was in the affirmative and against the assessee.

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