Law:

Section:

Section 263, read with section 154, of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1974-75 - Assessee derived rental income from land, building: and machinery which were let out to several persons and income was assessed under head 'Income from other sources' - ITO later on passed order under section 154 allowing business loss pertaining to assessment years 1968-69 to 1972-73 to be set off against income from 'other sources' of assessment year 1974-75 without determining whether such income could be treated as business income or not - Whether order passed by ITO was not an order to rectify a mistake apparent from records as issue in present case required investigation and, thus, order of Commissioner under section 263 cancelling aforesaid ITO's order, was justified - Held, yes Facts The assessee derived rental income from land, building and machinery which were let out to several persons. For the assessment year 1974-75 the ITO had determined and assessed the total income of the assessee-company as income from 'other sources'. Subsequently, on the assessee's request, the ITO by a rectification order under section 154, allowed the benefit of deduction of business losses pertaining to the assessment years 1968-69, 1971-72 and 1972-73, to be set off. The Commissioner by an order under section 263 cancelled the rectification order passed by the ITO holding that the ITO had allowed the set off without determining whether income of the relevant year could be treated as business income or not. On appeal, the Tribunal held that the order of the Commissioner was justified. On reference: Held It is no doubt true that in case any business assets are hired out as part of the business activity carried on by the assessee or as commercial assets belonging to the assessee, income derived therefrom is assessable as business income. But whether or not a business activity is being carried on by the owner of the assets or in other words whether a particular letting is business has to be decided on the facts and in the circumstances of each case. An investigation of a fact has to be made to find out whether letting was…

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