Law:

Section:

Section 22 of the Income-tax Act, 1961 (Corresponding to section 9 of the Indian Income-tax Act, 1922) - Income from house property - Chargeable as - Assessment year 1958-59 - Assessee-company engaged in producing pictures closed down business and leased out studio - It also let out on hire its machineries - Subsequently, assessee sold all machineries and building was rented to be used as a cotton godown - Whether although memorandum and articles of association of assessee-company allowed it to rent out immovable properties and machineries, yet having regard to aforesaid facts, it could be concluded that rental receipts had to be assessed as income from property and not as income from business - Held, yes FACTS The assessee-company had a studio building. The company was producing pictures in the said studio but it closed down that business of production of pictures before the assessment year 1958-59 and leased out the studio to third parties for production of pictures. It also let out on hire its machineries. In the previous year relevant for the assessment year 1958-59, the assessee sold away all the machineries pertaining to the film production and the studio building was rented to a cotton merchant to be used as a cotton godown. In the previous years relevant to the assessment years 1959-60, 1960-61 and 1961-62 the company carried on the business of distribution of pictures and earned income by way of commission on the collections. In the said three years the assessee claimed certain amount which represented irrecoverable part of the rent from the producers who had taken the assessee's studio on rent for production of pictures. The ITO disallowed the said claim on the ground that the claim related to a business which had been completely wound up, that the business of distribution of pictures was different from production of films, and that the business of production was not in existence in these years. The AAC, however, allowed the assessee's claim holding that the memorandum and articles of association of the assessee-company allowed it to rent out the immovable properties and machinery. In the subsequent assessment year, the assessee claimed that the…

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