TaxTMI 
TaxTMI 
2010 (11) TMI 694
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....Officer is of the opinion that there was no intention of the assessee to carry out the business, therefore, rental income is to be assessed only as 'income from other sources'. While computing the income under the head 'Other sources', the Assessing Officer has allowed only deductions for depreciation on building and equipments and insurance under section 57(iii) of the Income-tax Act, 1961. The Assessing Officer is of the opinion that since the assessee has not incurred any major expenses on repairs, therefore, they are not allowable deductions under section 57(iii) of the Income-tax Act. With regard to the miscellaneous income representing the credit being more than three years old written off aggregating to Rs. 1,84,215 the Assessing Officer held that the expenditure relevant to such cessation of liability was not at all relevant for deriving the income. Merely because such miscellaneous income is admitted under the head 'Business' it does not mean that it is entitled to deduction of expenditure of all kinds. Therefore, the expenditure other than the depreciation allowance and the insurance was not allowed as deduction under section 37 of the Income-tax Act. 3. The assessee p....
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....mmercial business. The intention of the assessee is a predominant factor to decide the nature of activities undertaken by the assessees. He has also invited our attention to the letter filed by the assessees for obtaining loan from the bank for the revival of its business with the submission that this letter was filed on 10-8-2009 after the assessment is over and the appeal was pending before the CIT(A). The assessee has applied the bank for financial assistance only to create an evidence that he had an intention to revive its poultry business. Nothing is placed on record in support of the contention that the assessee was ever serious in reviving its business. He has closed down his business in October, 2000 and moved this letter to the bank in August, 2009 after a period of 9 years. Nothing is placed on record as to how much efforts were made by the assessee during the period of 9 years for the revival of its business. After the closure of the business, assessee is not at all engaged in the poultry business. Therefore, he has no intention to revive its poultry business and the Assessing Officer has rightly treated the rental income as an income from other sources. 5. The ld. Co....
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....te or suggest the intention of the assessee for the revival of its business. Undisputedly business was discontinued in October, 2000 and till 10-8-2009 no effort was made by the assessee for its revival. After the refusal of financial assistance by the bank no efforts were made by the assessee with any other financial institution for the revival of its business. Meaning thereby that except this document nothing is on record to suggest that assessee ever had an intention to revive or restart its business. 8. We have also carefully perused the various judgments referred to by the parties and we find that period of discontinuance of business activities is not a sole factor to determine the nature of the rental income earned from leasing out of its asset. The predominant factor is intention of assessee with which the asset was leased out. Period of discontinuance is one of the important factor to draw an inference about the intention of the assessee. In the case of Vikram Cotton Mills Ltd. (supra), the Hon'ble Apex Court has categorically held that it is predominantly matter of intention. Intention is an inference to be drawn from the relevant facts. In each case it has to be gather....
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....ness for a temporary period with the object of tiding over the crisis condition. There was never any act indicating that assessee never intended to carry on the business. 9. Similarly, in the case of G.V. Rattaiah & Co. (supra) the assessee leased out its business assets to two companies who were trader in Virginia Tobacco. The assessee did not stop its trading activities in tobacco. It was purchasing tobacco and selling it, of course without grading and processing it in a small way. It was also earning huge commission amounts by purchasing tobacco for others. It was also getting commission by finding export market to other tobacco dealers and exporters, thus, it was maintaining contacts with many of the importers of tobacco in USSR and China. With these facts the Hon'ble jurisdictional High court have held that the intention of the assessee to treat the demised premises as well as the assets of the assessee company as its business assets through out the period of lease and it had never abandoned the idea of resuming its business after finding a favourable atmosphere. Their Lordship have further held that length of lease period is undoubtedly a relevant circumstances in finding ....
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....n in that business on the facts and in the circumstances of each case including true interpretations of the agreement under which the assets are let out. Where all the assets of the business are let out, the period for which 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. If only or a few of the business assets are let out temporarily while the assessee is carried out his other business activities then it is a case of exploiting of the business assets, otherwise then employing them for its 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 transactions will only be the exploitation of property by a owner thereof, but not exploitation of business asset. Similar view was expressed by different High Courts in following cases : 1. Metal Products of India v. CIT [2007] 293 ITR 618/[2006] 156 Taxman 52 (Punj. & Har.) 2. Madras Silk & Rayon Mills (P.) Ltd. v. ITO [2003] 262 ITR 122 (Mad.). ....