Law: Income Tax Act, 1961

Section: 256

Income-tax----Income---Business income---Income from property---Premises let out to different parties after closure of business and after sale of machinery---Rental receipts accrue from ownership of property and so not assessable as income from business. The assessee had a manufacturing business, which was closed 35 years ago. The machinery was sold and the premises including the staff quarters were let out to different parties on rent. The Tribunal held that the premises and staff quarters were commercial assets of the assessee and so the rental income was assessable as income from business. On a reference: Held, reversing the decision of the Tribunal, that when the business activities had come to an end about 35 years ago and the machinery was also sold, the premises could not be said to have retained their old character as business assets. Therefore, the Tribunal was not justified in holding that the rental income was assessable as income from business. Held also, that each assessment year was a unit by itself and the liability of the assessee was to be determined in respect of the state of affairs in the particular year. C.I.T. v. Central Studios (P.) Ltd. (1973) 88 ITR 298 (Mad.) rel Bengal Jute Mills Co. Ltd. v. C.I.T. (1949) 17 ITR 308 (Cal.); C.E.P.T. v. Shri Lakshmi Silk Mills Ltd. (1951) 20 ITR 451 (SC); East India Housing and Land Development Trust Ltd. v. C.I.T. (1961) 42 ITR 49(SC) and Sultan Brothers (P.) Ltd. v. C.I.T. (1964) 51 ITR 353 (SC) ref. K. K. Vidyarthi and S. K. Sharan for the Commissioner Nemo for the Assessee. JUDGMENT SACHCHIDANAD JHA, J.---These two references under section 256(1) the Income Tax Act, 1961, are at the instance of the Revenue. The question of law referred to this Court for opinion is: "Whether the Tribunal was correct in holding that the rental income of the assessee was liable to be assessed as business income?" The material facts are as follows: The assessee had leased out a certain portion of the properties of Ramdas Oil Mills and Ramdas Industries for commercial purposes. It carried on the manufacturing and processing business, which was closed about 35 years ago. In the course of time, the machinery was also sold…

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