Law:

Section:

Section 28(i), read with section 22, of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment years 1986-87 to 1988-89 - Whether where assessee-company, which was carrying on bidi manufacturing business, due to labour problem temporarily let out some of its properties for generating income without any intention to close down its business, rental income derived from said letting was to be treated as business income - Held, yes FACTS The assessee-company was carrying on bidi manufacturing business. It acquired 58 properties for its bidi business consisting of factory building, godowns, officer/staff quarters, etc. The properties were all being used for the purpose of its business. However, due to labour problems and other circumstances, assessee temporarily let out its properties which were not immediately required by it for the purpose of its bidi manufacturing business. The assessee in its returns, filed for the assessment years 1986-87 to 1988-89, showed rental income as income from business and claimed depreciation and also claimed actual cost of maintenance. The Assessing Officer treated the rental income as the income from house property and, therefore, restricted the allowance for repairs and maintenance and disallowed the claim of depreciation. On appeal, the Commissioner (Appeals) confirmed the decision of the Assessing Officer. On second appeal, the Tribunal found that the properties were temporarily let out to keep them in good condition so that they could be used and exploited again for the purpose of bidi manufacturing business and that the assessee's intention was to increase its business gradually and not to close it down. The Tribunal on finding that in regard to the years in question, the assessee had carried on business held that there was no material on record to show that the business of the assessee had come to an end or was likely to come to an end, and, therefore, allowed the claim of the assessee. On reference : HELD The findings of the Tribunal revealed that the assessee was carrying on business in the years under consideration and there was no intention on the part of the assessee to close down the business. On the…

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