Law:

Section:

Income-tax----Business income--Assessee, a limited company leasing out its assets-¬Temporary suspension of business by company for temporary period for an object to tide over the crisis condition--Income of assessee from lease rent would be assessable to tax under the head profits and gains of business. 74 I T R 7; 37 I T R 171; 26 I T R 765; 20 I T ,R 451;(1946) 2 All ER 609; A I R 1932 PC 138 and I L R 59 Cal. 1343 ref. JUDGMENT SABYASACHI MUKHARJI, J.--These appeals by special leave arise from the judgment and order of the Allahabad High Court at the instance of the revenue. The Income-tax Appellate Tribunal, Bombay Bench, referred the following question of law for the opinion of the Allahabad High Court:- (The question related to the assessment years 1960-61, 1961-62, 1962-63 and 1963-64). "Whether, on the facts and in the circumstances of the case, the income derived by the assessee-company by way of lease rent from the letting out of its assets during the years ended 31-12-59, 31-12-60, 31-12-61 and 31-12-62 is assessable to tax under the head profits and gains of business' or under the head 'Income from other sources'? 2. The assessee-company was a limited company. It carried on the business of manufacture of textiles. From 1949, the assessee-company started running into losses. At the end of Dec. 1953, the position was that as against the capital of Rs.11,00,000 the accumulated liabilities of the assessee-company amounted to ks.26,00,000 Because of this the assessee-company stopped its manufacturing activity from December, 1953. This state of affair continued till 21-5-1956 when one of the creditors of the company filed a winding up petition m the High Court. M/s. Industrial Finance Corporation, who was one of the major creditors of the company, had in exercise of its powers under an English mortgage of the fixed assets of the company taken actual physical possession of the immovable properties hypothecated to them. Under S.153, Companies Act, 1913, the High Court with the approval of the assessee-company and the creditors evolved a scheme where under the business assets of the assessee-company were let out to M/s. General Fibres Dealers (Pvt.) Ltd.,…

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