Law:

Section:

Section 28(i), read with section 56, of the Income-tax Act, 1961 – Business income - Chargeable as – Assessment years 1965-66 and 1966-67- Assessee company built residential quarters for its employees – It also made available on rent accommodation to government to establish bank, post office, police station and other facilities – Assessee required these facilities to carry on its business efficiently – Assessee also made available furniture on hire, both to its employees as well as Government for use of accommodation – Whether letting out of furniture was subservient to letting of accommodation i.e. for more beneficial enjoyment of accommodation and, therefore, receipts from hire of such furniture was income from business and not income from other sources – Held, yes FACTS The assessee, a Government undertaking, not only built residential quarters for its employees but also made available on rent to the Government accommodation for locating a bank, post office, police station, Central Excise office and railway staff quarters, as it required these facilities for carrying on its business efficiently. During the relevant accounting years, the assessee made available furniture on hire, both to its employees as well as to the Government departments. The ITO in both the years in question assessed the receipts from hire of furniture as the assessee's income from other sources under section 56. On appeal, the AAC upheld the order of the ITO and rejected the contention of the assessee that receipts from hire of furniture should be treated as the assessee's income from business. On further appeal, the Tribunal upheld the contention of the assessee and allowed the appeal. On reference: HELD In order that clause (iii) of section 56 may apply, the letting of the machinery, plant or furniture should be inseparable from the letting of the building. The word 'inseparable' does not connote that the machinery, plant or furniture should by its very nature be inseparable from the building so that the building has also necessarily to be let along with it, or that it should be fixed to the building. The inseparability referred to in the section arises from the intention of the…

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