TaxTMI 
TaxTMI 
TaxTMI 
1987 (12) TMI 1
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....ing into losses. At the end of December, 1953, the position was that as against the capital of Rs. 11,00,000, the accumulated liabilities of the assessee-company amounted to Rs. 26,00,000. Because of this, the assessee-company 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, 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 (P.) Ltd., Calcutta, on Rs. 2,50,000 per year rent. The lease was for ten years with an option of renewal for another ten years. The intention, it was contended, was that the various creditors would be paid out of the lease money. The management of the assessee-company was tran....
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....y it from the lease of the plant and machinery was business income and was liable to be adjusted against the unabsorbed loss of the preceding year. It is here that the question arises. If it was business income, then the unabsorbed loss of the preceding year could be adjusted against such income. If, on the other hand, it was not, then such income could not be adjusted against the loss of the previous year. The hub of the matter lies there. It is well-known that section 24 of the Indian Income-tax Act, 1922, deals with set off and carry forward of losses. Under sub-section (1), where an assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year. Sub-section (2) provides that where an assessee suffers loss in any business and the loss cannot be wholly set off under sub-section (1), the unabsorbed loss shall be carried forward to the succeeding year and shall be set off against the income from the same business. Before the loss could be carried forward, it was necessary that the income against which the loss h....
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....best advantage and he might do so either by using it himself personally or by letting it out to somebody else. The view that in order to constitute business income, the commercial asset must at the time it was let out be in a condition to be used as a commercial asset by the assessee himself was not correct. In that case, the assessee-company was a manufacturer of silk cloth and as a part of its business, it installed a plant for dyeing silk yarn. During the chargeable accounting period, January 1, 1943, to December 31, 1943, owing to difficulty in obtaining silk yarn on account of the war, it could not make use of this plant and it remained idle for some time. In August, 1943, it was let out on a monthly rent. The question was whether such sum representing the rent for five months realised by the assessee was chargeable to excess profits tax as profits of business or was income from other sources and was, therefore, not chargeable to excess profits tax. It was held by this court that it was a part of the normal activities of the assessee's business to earn money by making use of its machinery by either employing it in its own manufacturing concern or temporarily letting it to othe....
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....those circumstances, the remainder was sublet for fourteen years at an annual rent of 1,150 pounds. The General Commissioners of Income-tax decided that the difference of 400 pounds between the outgoing of 750 pounds for the land retained and the incoming of 1pounds, 150 for the land disposed of was " income received from an investment ", and the business not being one within the special categories mentioned in the Finance Act, 1939, that 400 pounds was not taxable. Lord Scott J. held that the word " investment " must be construed in the ordinary popular sense of the word as used by businessmen and not as a term of art having a defined or technical meaning and that it was impossible to say that the Commissioners had erred in law in coming to the conclusion that the transaction resulted in an investment. Lord Scott J. emphasised on the point that after the business of the company had dwindled, it partitioned part of the land from the rest and sublet it by installing a heating apparatus for the sub-lessee. It was found that war conditions had reduced the company's business to very small proportions and they cut their loss by going out of business in respect of the major part of their....
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....nery. The assessee-firm did not thereafter manufacture anything and it had accordingly no further trading or commercial activity. In July, 1940, the company executed a managing agency agreement in favour of U & Co. consisting of R and G as partners. In January, 1941, the company appointed as its selling agent R & Co. consisting of R, G and S as partners. In April, 1941, the shares of the partners in the assessee-firm were adjusted so as to equalise, as far as possible, the share of N with the shares which his sons got in the several firms. All the three firms were registered under section 26A of the Indian Income-tax Act, 1922. The question was whether the excess profits tax authorities were justified in amalgamating the income of U & Co. and R & Co. with the income of the assessee-firm under the provisions of section 10A of the Excess Profits Tax Act, 1940. It was held that in the facts and circumstances of the case, the letting out of the plant and machinery by the assessee-firm to the company could not be held to fall within the body of the definition of " business " under section 2(5) and as the assessee-firm had, therefore, no business during the relevant period to which the A....
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.... business in prosecution of one of its objects in the memorandum. It depends on the facts and circumstances of each case. In New Savan Sugar and Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7, this court was dealing with a case where the appellant-company was carrying on the business of crushing sugarcane and gur refining. Its managing agents wrote a letter addressed to its shareholders referring to the alarming increase of Government interference in the affairs of the sugar industry in Bihar and the increase of wages of the workers, the levy of a cess and deterioration in cane crops and advising the acceptance of an offer of the lease of the company as a running concern. There, after examination, it was found that the cumulative effect of different clauses of the deed suggested that the assessee would have no concern with the production of the company. It was, therefore, held, on the terms of the lease deed, that the intention of the appellant was to part with the entire machinery of the factory and the premises with the obvious purpose of earning rental income and not to treat the factory and the machinery as a commercial asset during the subsistence of the lease. In each case, t....