Law:

Section:

Section 2(5) , read with rule 4(4) of Schedule I to the Excess profits tax Act, 1940 - Business - Assessee was a banking company - As per its memorandum of association one of its objects was to purchase, take on lease or in exchange or otherwise acquire any moveable or immovable property which company thought necessary or convenient for purpose of its business - Assessee owned a six-storeyed building where its offices were located on ground floor and part of sixth floor while rest of building was let out to tenants on rent - Whether erecting a multi-storeyed building was itself an investment, besides affording accommodation for bank to carry on and advertise its business and house its head office and records - Held, yes - Whether realisation of rental income by assessee bank was in course of its business in prosecution of one of objects in its memorandum and, therefore, it was liable to be included in its business profits and was assessable in excess profits tax - Held, yes FACTS The assessee was a banking company in a large way of business. In the memorandum of association of the assessee bank one of the objects of the assessee was stated to be to purchase, take on lease or in exchange or otherwise acquire any movable or immovable property which the company may think necessary or convenient for the purpose of its business, and to construct, maintain and alter any buildings or works necessary or convenient for the purpose of the company. It owned a six storeyed building where its offices were located on the ground-floor and a part of the sixth floor, while the rest of the building was let out to tenants. The Tribunal found that the portion let out was about four to five times the floor area of the portion of the building occupied by the assessee for the purposes of its own business. The Excess Profits tax Officer assessed the assessee on the rental income in respect of the relevant accounting period. On appeal the AAC, upheld the assessment on the basis of sub-rule (2) of rule 4 of Schedule I to the Act. On a further appeal, the Tribunal held that there was no doubt that the premises were built with a view partly to housing the head office of the company, and…

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