TMI Blog2011 (4) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... anian Senior Standing Counsel COMMON JUDGMENT ELIPE DHARMA RAO, J. These appeals are preferred by the Revenue against the common order passed by the Income Tax Appellate Tribunal (in short "the Tribunal") Madras 'C' Bench, dated 08.03.2007 in ITA.Nos.1538 to 1540/Mds/2005 for the assessment years 1997-98 to 1999-2000. Since the issue involved in these appeals are one and the same and they are inter-connected, they were heard together and disposed of by this common judgment. 2. The facts in brief are as follows :- In the present appeals, we are concerned with the returns filed by the assessee in respect of assessment years 1997-98 to 1999-2000. Assessee is a Private Limited company. It has submitted its returns in the previous years showing nil income. However, the case was re-opened by issue of notice under Section 148 of the Income Tax Act, 1961 (in short "the Act"). On scrutiny, it was found that the assessee had let out its factory with all machinery with effect from 8.9.1993. Although the assessee had credited the same as "other income" in its Profit and Loss Account, for income tax purposes, it claimed the same as business income and adjusted it agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pearing for the Revenue submitted that the decision in Vikram Cotton Mills Ltd., is distinguishable to the facts of the present case and the latest decision of the Supreme Court in Universal Plast Ltd. Etc., v. CIT ([1999] 237 ITR 454 [SC] = 1988 (Supp) SCC 442) covers the entire issue and, following the latter decision, the present appeals are to be allowed. 6. In Vikram Cotton Mills case, the assessee company was a limited company. It carried on the business of manufacture of textiles. From 1949, the assessee company started running into losses. At the end of December 1953, the position was that as against the capital of Rs 11,00,000 the accumulated liabilities of the assessee company amounted to Rs 26,00,000. Because of this, the assessee company stopped its manufacturing activity from December 1953. This state of affairs continued till May 21, 1956, when one of the creditors of the company filed a winding up petition in the High Court M/s Industrial Finance Corporation, who was one of the major creditors of the company, had in exercise of its powers under an English mortgage of the fixed assets of the company taken actual physical possession of the immovable properties hypo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on renewal years and after the expiry of the period the property reverted back to the assessee. 16. It is predominantly a matter of intention. Intention is an inference to be drawn from the relevant facts. All the relevant facts, it appears have been considered by the Tribunal from the correct standpoint i.e. ordinary prudent businessman or as in England it used to be man on the top of the platform omnibus , or director s armchair . If on that test a plausible conclusion has been drawn no objection can be taken. 17. On that basis applying the correct principle the Tribunal found that the intention was not to part with the machine but to lease it out for a temporary period as a part of exploitation. In such a circumstance, it cannot be said that no business was carried on and their income derived from the machine letting was only a rent income. There was a temporary suspension of business for a temporary period for an object to tide over the crisis condition. There was never any act indicating that the assessee never intended to carry on the business. 18. In the background of these principles and in the facts and circumstances of the case so found, we cannot say such a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to carry on the business in future." 8. The Apex Court, after analysing various other decisions, laid down the following propositions :- "12. In the light of the above discussion, the propositions may be summarised as follows: (1) no precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease amount, rents, licence fee) received by an assessee from leasing or letting out of assets would fall under the head profits and gains of business or profession ; (2) it is a mixed question of law and fact and has to be determined from the point of view of a businessman in that business on the facts and in the circumstances of each case including true interpretation of the agreement under which the assets are let out; (3) where all the assets of the business are let out, the period for which the assets are let out is a relevant factor to find out whether the intention of the assessee is to go out of business altogether or to come back and restart the same. (4) if only or a few of the business assets are let out temporarily while the assessee is carrying out his other business activities then it is a case of exploiting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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