Law: Income Tax Act, 1922

Section:

Income-tax----Income--Rent from leasing property whether income from property or business income depends on facts of particular case-girt of factory premises leased out to decrease losses--Rent will be assessable as business income. In order to determine whether rent is assessable as income from property or business income, what has to be seen is whether the asset is being exploited commercially by letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case. The object of the assessee-company was to manufacture rubber goods. The factory premises of the assessee consisted of three portions, the main building, a front shed and a rear shed. In order to curtail the losses, production was reduced with the result that the rear shed became surplus. The rear shed was leased out with a view to reduce the losses. On the question whether for the years 1971-72, 1973-74 and 1974-75, the rent was assessable as business income: Held, that the facts clearly showed that the shed was leased out temporarily as a commercial asset. The rent was, therefore, assessable as business income. C.I.T. v. Super Fine Cables (Pvt.) Ltd. (1985) 154 ITR 532 (Delhi) 'applied. New Savan Sugar and Gur Refining Co. Ltd. v. C.I.T. (1969) 74 ITR 7 (SC) ref. JUDGMENT GOKAL CHAND MITAL, J.---The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question for the opinion of this Court:-- "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the rental income derived by the assessee-company for the assessment years 1971-72, 1973-74, and 197475 from letting out of a part of the factory building constituted 'business income?" Anand Rubber and Plastics (P.) Ltd., Faridabad, the assessee, is a private limited company incorporated in the year 1963. The objects of the company included manufacture of all types of rubber goods from natural and synthetic rubber components, mattresses, pillows, sheets and solutions, etc. To carry out the objects, the assessee installed a plant for the manufacture of cycle and…

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