TaxTMI 
TaxTMI 
1976 (3) TMI 83
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.... course of the assessee's business and therefore it should be treated as income from business. The learned Departmental Representative, on the other hand, pointed out that no milling had been done in the recent past and the facts of the case were on all fours with the decided case of Tripurasundari Cotton Mills Ltd. (62 ITR 193). 4. The following fats had been ascertained by us. The assessee is a public limited company. They owned a rice mill with machineries and godowns and drying yards. They carried on rice milling and later on leased out the mills, machines and godowns together to one partly till 1955. Thereafter they had leased out by annual lease to different parties. In 1971 they had stopped leasing also. The machineries were in fact with the assessee but they were not used during this year. During the accounting year each godowns was let out for short duration to different parties. In all, during the s. 20 different businessmen had used the godowns. The Company had not been under liquidation and machineries have not been sold. 5. We viewed the problem from two angles (i) the nature of the asset and (ii) the activity of the assessee. If the nature of the asset is someth....
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....all the difference. 7. So the commercial asset is being exploited by the assessee in a method suitable to the conditions and such exploitation is, to use the phrase in the arguments of the assessee in the case of CIT vs. National Storage Pvt. Ltd. 66 ITR 596 (this argument was approved by the Supreme Court) not by the exercise of the property rights as the owner, on the one hand, but as income from licences who are allowed the use of the property which is the subject-matter of the business. The income from such exploitation, it is well settled, is business income and the activity is business. A number of cases on this point has been decided by the High Court and merely as illustrations we would cite the following :- (i) lease of rice mill was held to be business in CIT vs. Managalagiri Shri Umamaheswara Gin & Rice Factory Ltd. (AIR 1926 Mad. 1032). (ii) In re Sudhacharan Roy Chowdary, the lease of a jute press was held business (3 ITR 114) (iii) In Bosotto Bros., Ltd. the lease of a hotel was hold to be business (8 ITR 41) (iv) In CIT vs. National Mills Ltd. Lease of textile factory was business (34 ITR 155) (v) In Laxmi Industries (P) Ltd. (41 ITR 645) the busine....
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....and, godowns with special facility for storage of firms. Services were also provided for sale keeping of the firms. The godowns were let out to different parties as in this case. The Supreme Court held that such letting out was business. No doubt, in that case there was a further finding that the services rendered by the assessee therein was complex matter and therefore it could be treated as business. But in the case we have already noted that what is let out is commercial asset. Even otherwise the godowns are fit for storage of commercial goods and therefore, cannot be treated as an ordinary house property. 10. We have noticed two other cases where there was no such complex services given by the assessee company as in the National Storage case. Still the finding was that the assessee was doing business. The first case to be noted is the decision of the Punjab High Court in Manoher Singh vs. CIT (58 ITR 592). In that case the assessee built a house consisting of 13 rooms. The rooms had attached bath rooms and were furnished with bed-sheets, blankets etc., they were let out individually for short or long durations. The assessee supplied lunches and dinners if the tenants so desi....
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....imes for none, whereas a limited company comes into existence for some particular purpose an if it comes into existence for the particular purpose of carrying out a transaction by getting possession of concessions and turning them to account, then that is a matter to be considered when you come to decide whether doing that is carrying on a business or not." The above observations were quoted with approval by this Court in the case of Karanpura Development Co. Ltd. vs. CIT". 12. Now it will be seen from the passage quoted earlier that the Supreme Court agreed that a property of a limited company which is let out could be either business activity or could be either business activity or could be by way of investment. If the assessee happens to be a company Prima facie, it is to be treated as business because as the Supreme Court says, a limited company comes into existence for carrying on a business. Again they have observed at page 707 quoting from their earlier decision in Karanpura Development Company Ltd. (44 ITR 362) that :- "Ownership of property and leasing it out may be done as a part of business, or it may be done as land-owner. Whether it is the one or the other mus....