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TMI Blog1968 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... powerloom factory at Madurai with 12 powerlooms. The assessee manufactured handloom cloth for a number of years and for that purpose he used fixed assets consisting of machinery and buildings at No. 28, Chairman Muthuramier Road, Madurai. The business was carried on up to April 12, 1954, and thereafter the manufacturing was stopped, with the result that the machinery and buildings were lying idle. With effect from November 1, 1956, the powerlooms were, however, commissioned again to work by one Radhakrishnier under the terms of an agreement dated June 13, 1957. This agreement was renewed on April 16, 1958, and one of the terms of this agreement was that Radhakrishnier was at liberty to shift the powerlooms with all the related equipments to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the Tribunal thought that income from leasing out the powerlooms was not income from business. The second agreement has has been styled by the parties as a deed of agreement of agency. That by itself may not be of much significance. By that agreement, the assessee appointed the second party as his managing agent for a period of nine years from April 1, 1958. As the second party was already in possession of the powerlooms as the managing agent of the assessee under the first agreement, the second party was by the second agreement authorised to shift the looms and accessories to the new premises and there put the looms into commission and work them as in the old premises. The ownership of the looms should always be with the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the period of the agreement of agency. The second party should meet all the public charges. A further provision in the agreement was that the licence, for all the installations should stand in the name of the first party, though the second party should be entitled to make such applications, appeals and the like and sign such papers as may be necessary for the purpose of obtaining or renewing the necessary permits for the running of the looms in the name of the first party during the continuance of the agency and the first party for all purposes appointed the second party as his power agent. The question is whether, having regard to the terms of the agreement, the income derived by the assessee can be said to be income under the head " Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will justify such a view. It is true that the second party has been put in possession. But that is explainable, because even as an agent or managing agent, to commission the powerlooms and run the same, he would have to be put in possession. The fixed payment of a monthly profit of Rs. 650 has been strongly relied on for the revenue and it is contended that this shows that the assessee has no interest in the outcome of the business of running a powerloom by taking the risk and getting the advantage or disadvantage thereof. Apart from the fact that this fixed payment taken by itself or appreciated in the light of the other circumstances cannot in our view be regarded as rent, the fixation of an invariable monthly payment does not necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness, rejecting the contention of the assessee that the lease amount was not a profit assessable under section 10(2) of the Indian Income-tax Act but was only assessable under section 12 and hence the second proviso to section 10(2)(vii) did not apply. The Punjab High Court, referred to a number of decided cases and concluded that what, in such circumstances, the court had to decide was whether, in the facts and circumstances found by the Income-tax Appellate Tribunal, the assessee itself carried on business or not. The court was inclined to think that so long as a business asset was exploited as such and profits or gains were earned from them, the same were profits and gains of a business ; however the owner of the commercial asset explo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. Mr. Balasubramanyan next contended that the subject-matter of the agreement is not the business but only the looms and their accessories, more especially when the assessee had stopped the business of manufacturing handloom cloth some years earlier to the agreement. We think that this is not a proper reading of the terms of the agreement. They clearly show that the powerlooms have been put into the hands of the second party in order that he may bring them into commission and carry on the business and not to keep them idle. The business itself consists in this case of working the machinery and producing handloom cloth and that is what the second party has been asked to do under the agreement. Mr. Balasubrahmanyan referred us to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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