TaxTMI 
TaxTMI 
2005 (9) TMI 60
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.... partner. Under the terms and conditions of the partnership deed, the goodwill of the erstwhile business was to remain exclusively with the assessee-trust. The assessee trust retired from the said partnership with effect from January 1, 1985. Under the terms and conditions of the retirement cum dissolution deed, the assessee trust granted a licence to the Bhalchandra Trust to use the name and goodwill of the business. For the use of the name and goodwill, the Bhalchandra Trust was required to pay a monthly compensation of Rs. 35,000 to the assessee trust, irrespective of the fact as to whether the Bhalchandra Trust earned any profit or suffered any loss for running the said business. For three months of the previous year relevant to the assessment year 1985-86 i.e., January, February and March the assessee trust received compensation amounting to Rs. 1,05,000. The assessee claimed that the compensation so received should be assessed under the head "Income from other sources". However, the Assessing Officer vide order dated February 25, 1988, assessed the said amount under the head "Income from business" while framing the assessment under section 143(3) of the Act. The assessee ca....
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....he assessee and that, therefore, it could not be said that there is any nexus between the business and the income received by way of compensation. Accordingly, the Commissioner of Income-tax (Appeals) directed the Inspecting Assistant Commissioner to treat the income by way of monthly compensation as income under the head "Other sources". In the case of CIT v. B. M. Kharwar [1969] 72 ITR 603, the apex court has held that if the transaction is embodied in a document, the liability to tax depends upon the meaning and content of the language used in it in accordance with the ordinary rules of construction. In the case of Sultan Brothers Private Ltd. v. CIT [1964] 51 ITR 353, the Constitution Bench of the Supreme Court while dealing with the question as to whether the rent income was business income taxable under the Indian Income-tax Act, 1922 formulated the following principle (headnote): "Whether a particular letting is business has to be decided in the circumstances of each case. Each case has to be looked at from.a businessman's point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner". In the case of Universal Pl....
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....t is being let out for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case. Pure and simple, commercial assets like machinery, plant, tools, industrial sheds or godowns having high business potential stand on a different footing from assets like land or building. (iv) If an assessee derived income from a commercial asset which is capable of being used as a commercial asset, then it is income from his business, whether he uses that commercial asset himself or lets it out to somebody else to be used. The asset would not cease to be commercial asset simply because temporarily it was put out of use or it was let out to another person for his use. (v) So long as the commercial asset is capable of being exploited as such, its income is business income irrespective of the manner in which the asset is exploited by the owner of the business. He is entitled to exploit it to his best advantage and he may do so either by using it himself personally or by letting it out to somebody else. (vi) If the commercial asset is not capable of being used as such or as a commercial asset, then its being let out to ot....
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....ed shall be 'M/s. Nijrang Packaging Industries', the goodwill to the business shall continue to belong exclusively to Nijrang Trust and party of the second part shall have no right, title or interest therein during the subsistence of this partnership or on dissolution thereof." Clauses (3) and (8) of the deed of retirement-cum-dissolution read as under: "3. That the party of the first part Nijrang Specific Trust hereby grants licence to the party of the second part Shri Bhalchandra Trust to use the name and goodwill of the business and the party of the second part Shri Bhalchandra Trust undertakes to pay the monthly compensation of Rs. 35,000 (Rupees thirty-five thousand only) for such use. The party of the second part Shri Bhalchandra Trust shall be liable to pay such compensation irrespective of the fact whether hereafter it earns any profits or incurs any losses from the running of the business of M/s. Nijrang Packaging Industries. It is distinctly understood that this compensation is not being paid as a share of business profits earned by the party of the first part but is being paid as the compensation for the user of the goodwill and therefore, will be payable even in case ....