Law: Income Tax Act, 1961

Section: 256(1)

Section 28 read with section 72 of the Income-tax Act, 1961 - Business - Commencement of/carrying on of - Assessment year 1982-83 - Assessee company carried on board mill business upto 1971 and thereafter it leased out its mill on monthly rent as a means to overcome its financial crisis - Rental income was assessed as business income throughout period of lease - In relevant assessment year, lease expired and assessee filed a suit against lessee to handover possession of mill - ITO holding that assessee did not have any business, disallowed benefit of carry forward of loss or running expenses of business - Tribunal held that assessee not being in possession of mill after expiry of lease and matter being subjudice in court, it could not be said that assessee had any intention to restart business - However, Tribunal had not brought out any fact to show that assessee had decided to close its business - Whether when fact that assessee on expiry of lease had sued lessee for holding on remained uncontested, there could be no reason to forecast that it would be an impossibility for assessee to re-enter into mill for recommissioning its business - Held, yes - Whether, therefore, Tribunal's finding that assessee either did not intend to nor could it be in a position to restart business was based on no evidence and, hence, perverse - Held, yes - Whether , therefore, Tribunal was not justified in confirming disallowance of carry forward of loss and running expenses - Held, yes FACTS The assessee company carried on the board mill business up to 1971. In 1971 the assessee leased out its mill on monthly rent as a means to overcome its financial crisis. The Revenue accepted the letting out of the mill as an alternative means of commercial exploitation of the mills and assessed the rental income from the mill as income under the head 'Business' through-out the course of the lease. In the assessment year 1982-83, the lease expired and, consequently, a notice was given by the assessee to the lessee to hand over possession of the mill to the assessee. The lessee disputed the same and a civil suit was filed which was stated to be still pending. The ITO found that the assessee did…

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