Law:

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Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as CASES REFERRED TO Sutherland v. IRC [1918] 12 TC 63, Ensign Shipping Co. Ltd. v. IRC [1928] 12 TC 1169, IRC v. Broadway Car Co. (Wimbledon) Ltd. [1946 2 All ER 609, [1947] 1 All ER 798 JUDGMENT Chagla, CJ.-The assessee is running a silk mill known as Sri Lakshmi Silk Mills. Artificial silk cloth is manufactured in these mills. There is also a dyeing plant attached to the mills for dyeing silk yarn. The assessee's business was to manufacture silk cloth and also dye silk yarn. In the chargeable accounting period, 1st January, 1943, to the 31st December, 1943, the assessee, owing to the difficulty in obtaining silk yarn on account of the war, stopped his dyeing activities as a result of which the dyeing plant remained idle for some time. Therefore on the 20th August, 1943, he let this plant to Messrs. E. Parekh & Co. on a rental of Rs. 4,001 per month. The assessee received from E. Parekh & Co. Rs. 20,005 by way of rent for the period the plant was hired to the company during the accounting period. The Tribunal held that this sum of Rs. 20,005 was the assessee's income in the chargeable accounting period from business as denned in Section 2(5) of the Excess Profits Tax Act. The assessee's contention was that the business fell under Section 12 being profits and gains from other sources and therefore the Excess Profits Tax Act had no application to this income, and the question of law that has been submitted to us is whether in the circumstances of the case the assessee's income of Rs. 20,005 is profits from business within the meaning of Section 2(5) of the Excess Profits Tax Act and therefore or otherwise liable to pay excess profits tax. The point really lies in a very narrow compass. If this particular income is the result of the assessee's business and can be considered to be the profits and gains of that business, then undoubtedly this income is liable to pay excess profits tax. On the other hand, if it is not the profits or gains of the assessee's business and is income derived from other sources and falls under Section 12 of the Income-tax Act, then the Excess Profits Tax Act…

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