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2020 (7) TMI 216 - AT - Income TaxCorrect head of income - lease rent received by the assessee - Business of assessee taken over by the another Company as was running as JV - assessed under the head `income from business’ or `income from other sources’ - rehabilitation scheme - HELD THAT:- Appellant commenced the business but on account of poor financial viability the appellant company incurred losses and, eroded the entire net worth and was declared sick company under the Sick Industrial Companies Act, 1956. A rehabilitation scheme was prepared and sanctioned by Board for Industrial and Financial Reconstruction. Scheme envisaged joint operation of the plant on an irrecoverable lease of eight years in consideration of lease rentals; which has been extended from time to time. There was thus no intention of letting out the plant, building, machinery and licence to anyone. The set up of the business for carrying on the business. Further, when appellant entered the arrangement with Apollo, the intention was not to lease. The intention was to exploit the commercial assets through its expertise and derive income. There is no sale of assets or retrenchment of employees or even surrender of any licenses, registration etc. As per the agreement, it was the responsibility of the assessee to recruit labour for running the plant and meet all the labour law requirement in respect thereof, to purchase fuel and power required for running the plant, ensure the plant is properly insured, maintain the plant in working condition, undertake its repair and maintenance etc. The expenses so incurred by the appellant for the said responsibilities, were reimbursed by Apollo to it on actual basis. The production now by the appellant is in the name of Apollo and that too, to retain commercial viability in the operations and augment the financial position and at the same time bring about modernization and expansion in the plant. In view of section 56(2)(ii) coupled with the judgments of the VIKRAM COTTON MILLS LIMITED [1987 (12) TMI 1 - SUPREME COURT] the income should fall under the head ‘profits and gains of business’ and not from ‘income from other sources’. Accordingly, the ground raised by the assessee is allowed.
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