Temporary letting of commercial assets retains business income character when the business is not permanently discontinued.

Temporary letting of plant and machinery retained the assets' character as commercial assets because the business was not permanently abandoned and the letting was only under a court-approved arrangement to preserve the business and meet liabilities. Income from such temporary exploitation was therefore treated as business income, not income from other sources. On that basis, the document also notes that brought-forward business losses could be adjusted under the relevant set-off and carry-forward provisions.

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Issues: Whether lease rent derived from letting out the assessee-company's plant and machinery during the relevant assessment years was taxable as profits and gains of business or as income from other sources.

Analysis: The assessee-company had stopped manufacturing because of severe financial difficulty, but the assets were let out only temporarily under a court-approved scheme to preserve the business and liquidate liabilities. The plant and machinery continued to retain the character of commercial assets because there was no intention to permanently discontinue the business. Income earned from the temporary exploitation of such business assets remained business income, even though the assets were used by another entity to carry on the same kind of manufacturing activity. On that footing, the brought-forward business losses were capable of adjustment under the set-off and carry-forward provisions.

Conclusion: The lease rent was assessable under the head profits and gains of business, not income from other sources, and the answer was in favour of the assessee.

Final Conclusion: Temporary letting of commercial assets without an intention to permanently abandon the business does not change the character of the income from business income to income from other sources.

Ratio Decidendi: Where business assets are only temporarily let out as commercial assets without permanent cessation of the business, the income derived from such exploitation retains the character of business income.

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