TaxTMI 
TaxTMI 
2011 (4) TMI 558
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....ome. However, the case was re-opened by issue of notice under Section 148 of the Income Tax Act, 1961 (in short "the Act"). On scrutiny, it was found that the assessee had let out its factory with all machinery with effect from 8.9.1993. Although the assessee had credited the same as "other income" in its Profit and Loss Account, for income tax purposes, it claimed the same as business income and adjusted it against business losses. The assessing officer by order dated 27.02.2004, assessed the income as income from other sources. Aggrieved by the order of the Assessing Officer, the assessee preferred appeals before the Commissioner of Income Tax (Appeals), who, by common order dated 07.03.2005 in ITA Nos.98, 99 & 100/2004-05, allowed the appeals partly by holding that the lease rental income should be treated as business income and not under "other sources". Against the aforesaid order, the Revenue preferred appeals before the Income Tax Appellate Tribunal, which, by common order dated 08.03.2007, confirmed the decision of the appellate authority by relying upon the decision of the Supreme Court in CIT (Appeals) v. Vikram Cotton Mills Ltd., ([1988] 169 ITR 597). Challenging the ord....
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....mpany stopped its manufacturing activity from December 1953. This state of affairs continued till May 21, 1956, when one of the creditors of the company filed a winding up petition in the High Court M/s Industrial Finance Corporation, who was one of the major creditors of the company, had in exercise of its powers under an English mortgage of the fixed assets of the company taken actual physical possession of the immovable properties hypothecated to them. Under Section 153 of the Indian Companies Act, 1913, the High Court with the approval of the assessee company and the creditors evolved a scheme whereunder the business assets of the assessee company were let out to M/s General Fibres Dealers (Pvt) Ltd , Calcutta on Rs 2,50,000 per year lent. The lease was for ten years with an option of renewal for another ten years. The intention was that the various creditors would be paid out of the lease money. The management of the assessee company was transferred to a Board of Trustees appointed by the High Court. The lease money realised by the assessee company for assessment years 1957-58 to 1959-60 was assessed by the department under Section 10 of the Indian Income Tax Act under the hea....
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....it cannot be said that no business was carried on and their income derived from the machine letting was only a rent income. There was a temporary suspension of business for a temporary period for an object to tide over the crisis condition. There was never any act indicating that the assessee never intended to carry on the business. 18. In the background of these principles and in the facts and circumstances of the case so found, we cannot say such a finding was either perverse or not sustainable." 7. The aforesaid decision was subsequently clarified by a Full Bench of the Supreme Court in Universal Plast Ltd. Case. In the later case, the Supreme Court, while dealing with Vikram Cotton Mills Ltd., case, observed as follows:- "11. CIT vs. Vikram Cotton Mills Ltd. (988) 67 CTR (SC) 259 : (1988) 169 ITR 597 (SC) : TC 13R.760, is again a case arising under the IT Act, 1922. One of the creditors filed a petition in the High Court for winding up. The Industrial Financial Corporation took possession of fixed assets under an English mortgage of those assets. The assessee-company had gone into losses and had stopped its manufacturing activity. Under the scheme ....
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....se including true interpretation of the agreement under which the assets are let out; (3) where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same. (4) if only or a few of the business assets are let out temporarily while the assessee is carrying out his other business activities then it is a case of exploiting the business assets otherwise than employing them for his own use for making profit for that business; but if the business never started or has started but ceased with no intention to be resumed, the assets also will cease to be business assets and the transaction will only be exploitation of property by an owner thereof, but not exploitation of business assets. 9. The Apex Court, ultimately by applying the aforesaid propositions, the dismissed the appeals preferred by the assessee. 10. From the propositions laid down by the Supreme Court in the Universal Plast Ltd case, it is clear that no precise test can be laid down to ascertain whether the income receiv....