Temporary letting of commercial assets can still yield business income when the asset remains part of the business and is not permanently parted with.

Income from temporarily letting commercial machinery remains business income where the assets were acquired for the assessee's manufacturing business, remained usable in that business, and were hired out only because they could not then be installed at the premises. The lease terms preserved the assessee's priority right to use the machines and allowed termination on notice, indicating no intention to abandon or permanently part with the assets. A commercial asset does not lose its business character merely because it is temporarily exploited by hire, if the exploitation is incidental to profitable use of the business asset. The hire charges were therefore assessable as business income.

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Issues: Whether the income derived from letting the machines on hire to a sister concern was assessable as business income or as income from other sources.

Analysis: The machines were acquired for use in the assessee's manufacturing business and remained capable of being used in that business. They were let out only because they could not be installed at the assessee's premises for want of air-conditioning facilities. The lease terms reserved a priority right to the assessee to use the machines whenever needed and also allowed termination on notice, showing that there was no intention to part with the assets permanently. A commercial asset does not cease to yield business income merely because it is temporarily exploited by letting it out, provided it is not redundant and is used in a manner advantageous to the business.

Conclusion: The hire charges constituted business income and not income from other sources.

Final Conclusion: The references were answered in favour of the assessee and against the revenue.

Ratio Decidendi: A commercial asset acquired for the purposes of a business retains its character as a business asset when it is temporarily let out for profitable exploitation, unless the facts show an intention to abandon it or permanently part with it.

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