Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment years 1989-90 to 1991-92 - Assessee-company was formed with object to erect and work silk mills for large scale production of silk - In memorandum of association, there were other clauses also, which authorised company to carry on any other business which might enhance value or render profits by any of company's properties or rights - Company went into losses with result that most of its machinery had to be sold - Thereupon, there was no manufacturing activity and even there was nothing on record to suggest that company could again take up industrial or manufacturing activity - In such a situation, assessee-company leased out part of its premises to various occupants to run their businesses or industries - Whether, having regard to aforesaid facts, it could be concluded that income derived by assessee-company from leases was 'income from other sources' and not 'business income' - Held, yes FACTS The assessee-company was formed in the year 1950 and its main object was to erect and work silk mills for large scale production of all kinds of silk, artificial silk, mixed, mercerised and similar fabrics. In the memorandum of association, there were certain other clauses also, which authorised the company to carry on any other business which might enhance the value of render profits by any of the company's properties or rights. The company, after initial teething troubles went further into losses with the result that most of machinery had to be sold in December 1971. It was an admitted position that right from 1964 till 1971, there was absolutely no manufacturing activity. It was also an admitted position that even today, there was no manufacturing activity on the part of the assessee. The assessee-company leased out part of its premises to various occupants to run their business or industry. Considering that the company had stopped its industrial or manufacturing activity and further considering that the assessee-company was earning income only from the lease it had granted in favour of as many as 15 persons, the assessing authority held the income to be from other sources and…

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