Business income from surplus godowns remained taxable as business income, with linked depreciation and deduction claims allowed.

Income from letting out surplus warehouses or godowns used in a continuing flour mill business retained its business character because the business had not been discontinued and the premises remained part of the business establishment. The letting was only of surplus space, and the warehouses were later reused for business purposes. On that basis, the receipt was treated as business income, and the consequential claims for deduction under Section 32AB, depreciation on the warehouses, and repair expenses were allowable.

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Issues: Whether the income from letting out of surplus warehouses godowns used in the assessee's continuing business was taxable as business income, and whether the assessee was consequently entitled to deduction under Section 32AB, depreciation on the warehouses and repair s.

Analysis: The business of running the flour mill had not been discontinued. The finding accepted by the Tribunal was that the godowns were part of the business establishment, had been used for the flour mill business earlier, were let out only from the relevant period as surplus space, and were later again used for business purposes. In these circumstances, the receipt from letting out of the warehouses was held to retain its business character. Once the income was treated as business income, the ancillary claims for deduction under Section 32AB, depreciation and repair expenses followed.

Conclusion: The income from letting out of the warehouses was held to be business income and the assessee was held entitled to the consequential deductions and allowances.

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