TaxTMI 
TaxTMI 
2005 (2) TMI 31
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....her, on the facts and in the circumstances of the case, the Tribunal was justified to hold that the rental income should be assessed as income from business in place of income from house property assessed by the Assessing Officer?" The respondent/assessee is a company which was carrying on bidi manufacturing business at the relevant time. It acquired 58 properties for its bidi business consisting of factory building, godowns, officer/staff quarters, etc. The properties were all being used for the purpose of its business. However, due to labour problems and other circumstances, the assessee had to temporarily reduce its activities and consequently let out some of the properties, which were not immediately required by it for the purpose of....
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....ty. The Revenue filed an application seeking reference. On the Tribunal rejecting the same, the Revenue filed a petition under section 256(2) resulting in the order of reference dated January 19, 1998, referring the above question of law. We may refer to the relevant provisions of law before considering the question arising for opinion: Section 14 deals with heads of income. It classifies all income under the following five heads for the purpose of charge of income-tax and computation of total income: "salaries", "income from house property", "profits and gains of business or profession", "capital gains", and "income from other sources". Section 22 relates to income from house property and reads thus: "The annual value of pro....
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....out of the Excess Profits Tax Act, the Supreme Court considered a case of an assessee who was carrying on the business of manufacturing silk cloth and dyeing silk yarn. Due to difficulty in obtaining silk yarn, the assessee could not work the dyeing plant and let it on a monthly rent. The Supreme Court observed: "... we cannot accept the view that an asset which was acquired and used for the purpose of the business ceased to be a commercial asset of that business as soon as it was temporarily put out of use or let out to another...." In CIT v. Vikram Cotton Mills Ltd. [1988] 169 ITR 597 (SC), a company manufacturing textiles was closed on account of losses. A petition for winding up was filed and a scheme was evolved by the High Court....
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....ng it out for a temporary period ... In the context of these facts, it appears that it was a possible conclusion that the assessee intended that there should be a temporary suspension of the business for the purpose of reconstruction of the company and for that matter, there must be stoppage of the user of the machinery by the assessee. It was a temporary lease though for 10 years or 19 years on renewal and after the expiry of the period, the property reverted back to the assessee. On that basis, applying the correct principle, the Tribunal found that the intention was not to part with the machinery but to lease it out for a temporary period as a part of exploitation. In such a circumstance, it cannot be said that no business was carried....
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....ound that the object of the assessee-company was to manufacture rubber goods. The factory premises of the assessee consisted of three portions, the main building, a front shed and a rear shed. In order to curtail the losses, production was reduced with the result that the rear shed became surplus. The rear shed was leased out with a view to reduce the losses. On the question whether for the years 1971-72, 1973-74 and 1974-75, the rent was assessable as business income, it was held that the facts clearly showed that the shed was leased out temporarily as a commercial asset. The rent was, therefore, held to be assessable as business income. The entire case law on the subject was considered in detail by the Supreme Court in Universal Plast ....
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....thereof, but not exploitation of business assets." Let us now refer to the facts of this case. The Tribunal on examination of the facts, the records including the agreements of lease, recorded a finding of fact that the properties were temporarily let out to keep them in good condition so that they can be used and exploited again for the purpose of its bidi manufacturing business and that the assessee's intention was to increase its business gradually and not to close down its business. The Tribunal found that in regard to the years in question, the assessee had carried on business and the turnover was Rs. 7,33,55,039, Rs. 1,30,74,691 and Rs. 58,90,276. The Tribunal therefore, held that there was no material on record to show that the bu....