TMI Blog1976 (3) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... d business . The AAC agreed with him. 3. Before us, it is submitted that the assessee, a limited company had been doing business in rice milling and because of some reason or other they had stopped the milling and had let out the godowns on hire. It is submitted that it does not mean that the business had ceased. The letting out of the godowns is only in the course of the assessee s business and therefore it should be treated as income from business. The learned Departmental Representative, on the other hand, pointed out that no milling had been done in the recent past and the facts of the case were on all fours with the decided case of Tripurasundari Cotton Mills Ltd. (62 ITR 193). 4. The following fats had been ascertained by us. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standards to be used as godowns where the goods stored would not undergo damages. Now godowns have been used for storing commercial goods. It is known to be used for any other purpose. It is, therefore, an asset closely linked with commerce and we may, therefore, call it a commercial asset. As a commercial asset it is in no way different from any other commercial asset like machinery or factories etc. 6. Now, exploitation of a commercial asset may differ according to the conditions and circumstances. When a business is done in the normal manner, the godowns would be used for storage of the assessee s products and it is utilised in the assessee s normal business. Where rice milling had stopped, it does not cease to be a commercial asset u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell settled, is business income and the activity is business. A number of cases on this point has been decided by the High Court and merely as illustrations we would cite the following : (i) lease of rice mill was held to be business in CIT vs. Managalagiri Shri Umamaheswara Gin Rice Factory Ltd. (AIR 1926 Mad. 1032). (ii) In re Sudhacharan Roy Chowdary, the lease of a jute press was held business (3 ITR 114) (iii) In Bosotto Bros., Ltd. the lease of a hotel was hold to be business (8 ITR 41) (iv) In CIT vs. National Mills Ltd. Lease of textile factory was business (34 ITR 155) (v) In Laxmi Industries (P) Ltd. (41 ITR 645) the business leased was oil and rice mills. (vi) In Ram Mohandeo Prasad vs. CIT, the business leased was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness till the last assessment year and nothing has happened subsequently to change the position. 9. We will next examine the facts from the second angle i.e., activity of the assessee. The assessee, as we have stated, is a limited company. They own the godowns while had been let out on short durations to a number of licences during the season. The frequent changes in the licences of the godowns could only mean one thing that the godowns are under the control of the company. The balance sheet shows payment of salaries which we are told, is to be watchman. Under these circumstances, there is some parallel between the assessee s case and the decided case of CIT vs. National Storage Pvt. Ltd. (66 ITR 596) already noticed earlier. In that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idental services but the special hire out is a complex one and income obtained is not so must because of the bare letting of the tenaments. The operations in such letting of the property may be in the nature of business. 11. In the second case to be noticed there is no service at all rendered by the assessee to the persons to whom the buildings were let out. But still the Supreme Court held that it was business. In the case of S.G. Mercantile Corporation, Pvt. Ltd. vs. CIT (83 ITR 700) the facts were as follows : The assessee was a limited company. They had acquired certain lands on which they had constructed certain shops and stalls which were let out to shop keepers, stallers, etc. The Supreme Court held that such letting out was bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto existence for the particular purpose of carrying out a transaction by getting possession of concessions and turning them to account, then that is a matter to be considered when you come to decide whether doing that is carrying on a business or not." The above observations were quoted with approval by this Court in the case of Karanpura Development Co. Ltd. vs. CIT". 12. Now it will be seen from the passage quoted earlier that the Supreme Court agreed that a property of a limited company which is let out could be either business activity or could be either business activity or could be by way of investment. If the assessee happens to be a company Prima facie, it is to be treated as business because as the Supreme Court says, a limite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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