TMI Blog1967 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ore Cantt. The assessee is a Hindu undivided family with the name and style of Dal Chand and Sons, Ferozepore Cantt. Dittumal-Narsingh Dass of Fazilka was indebted to the assessee. There was some litigation between the two about the debt and ultimately the matter was settled in the High Court some time in 1937 when the assessee acquired a ginning factory, of which the valuation was set by the High Court at Rs. 39,650, in settlement of the debt from Dittumal Narsingh Dass of Fazilka. Between the years 1937-39 the assessee made additions in the machinery of the factory, its building and electricity fittings of a total cost of Rs. 70,446, thus bringing the total cost of the factory to Rs. 1,10,096. It obtained depreciation relief for the assessment years 1937-39 to 1952-53, in the amount of Rs. 67,420. The assessee ran the factory as such till 1948, and in that year it leased out the whole of the factory to one Ganesh Dass on an annual lease. The assessee ultimately on June 21, 1951, sold the factory for Rs. 1,60,000 to Bal Chand Sharda of Fazilka. In the assessment year 1952-53, the Income-tax Officer treated the depreciation amount of Rs. 67,420 as profit of the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apers Ltd. the second proviso to section 10(2)(vii) came for consideration of their Lordships in the Supreme Court and their Lordships observed : " We are concerned with the second proviso to section 10(2)(vii) of the Act. The substantive clause grants a balancing allowance in respect of the building, machinery or plant which has been sold or discarded or demolished or destroyed. The allowance represents the excess of the written down value over the sale price. Under the proviso, if the sale price exceeds the written down value but does not exceed the original cost price, the difference between the original cost and the written down value shall he deemed to be profits of the year previous to that in which the sale takes place ; that is to say, the difference between the price fetched at the sale and the written down value is deemed to be the escaped profits for which the assessee is made liable to tax. As the sale price is higher than the written down value, the difference represents the excess depreciation mistakenly granted to the asseesee ... The second proviso, therefore, in substance, brings to charge an escaped profit or gain of the business carried on by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business up to the date of the sale and that the business of running the ginning factory was being carried on to the date of the sale. At one time the learned counsel for the assessee was endeavouring to say that in the year 1948, the assessee closed its business of ginning factory, thereafter leased it out, but then he had to admit that there was no evidence in support of any such claim on the part of the assessee. The findings of fact by the Income-tax Appellate Tribunal are clear that the assessee was running the factory till 1948, the year it leased it out, on an annual lease, to Ganesh Dass, and the lease was renewed from year to year till on June 21, 1952, the assessee sold the factory. The learned counsel for the assessee has, therefore, urged the case of the assessee in so far as the first question is concerned only on the first of the three conditions referred to by their Lordships in the case just cited, that is to say, that during the previous (assessment) year the assessee was not carrying on the business of the factory and not even for a part of the year. The reason given for this is that the factory had been leased out to another person and it was he who was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than section 10." In that case the business has been temporarily stopped for some months, when the plant was leased out, on account of raw material not being available because of war. The amount of the lease money was thus found by their Lordships to fall under section 10. This case came for consideration before their Lordships again in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, though that was a case in which the business had been found to have been closed and is thus not applicable otherwise but their Lordships pointed out that even in Shri Lakshmi Silk Mills Ltd.'s case the court had clearly indicated that no general principle could be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to the ordinary commonsense principles. It has not been claimed that the business of the assessee has been owning and letting properties. So, if it is to be considered as business carried on by it, through the lessee, on payment of annual lease money, it can only be with reference to the business of the ginning factory itself. The Income-tax Appellate Tribunal in support of its conclusion relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase being from year to year, as stated, indicates that the assessee retained control with itself to be able to take up the business directly itself at the end of any year. It makes no difference that after a while it decided to and it did succeed in disposing of the factory. A business may be done in a number of ways and one of the ways is to run a commercial asset as such and another way may be that the commercial asset, at a particular time, is found to be more responsive to profit if allowed to be run as such by another as lessee. In either case the owner of the factory carried on the business of earning profits and gains from such an asset. The number of cases already referred to lends support to this approach, and the side of the assessee has not been able to refer to any case which on facts is something like the present case, and takes a view that supports the argument on its behalf. So long as a business asset is exploited as such and profits or gains are earned from it, the same are profits and gains of a business, however the owner of the commercial asset exploits the same. So when it is said whether he carried on the business himself or not that only means whether he ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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