TMI Blog1960 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... a return of income of ₹ 36,318 was made. It was stated in an explanatory note accompanying the return that during the account year relating to the assessment year this entire mill had been leased out at ₹ 3,000 a month to one Veerappa Chettiar. There had been no manufacturing operations during the year and only the opening stock of oil and cake as on March 31, 1955, had been disposed of during the year. It would appear that as a result of the working in the preceding years a total loss of ₹ 2,15,724 had been incurred which was carried forward. The assessee sought to have this loss set off against the profits realised during the year of account. In his order the Income-tax Officer recorded the income realised by the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the assessee had no other head of income shall be carried forward to the following year, and..............(ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year: provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year. It is seen from the above that in order to enable the set-off of losses carried forward, the business, profession or vocation in which the loss was originally sustained must be continued to be carried on by the assessee in the year in which the set-off is claimed. The view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that this income was not income from business but was from other sources. This contention was repelled by the Supreme Court. It was held that it was a part of the normal activities of the assessee's business to earn money by making use of its machinery by either employing it in its own manufacturing concern or temporarily letting it to others for making profits for that business when for the time being it could not itself run it, and that the dyeing plant had not ceased to be a commercial asset of the assessee and the sum representing the rent for five months received from the lessee by the assessee was therefore income from business and was chargeable to excess profits tax. While it is true that in so far as excess profits tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elds income must at the time it was let out be in a condition to be used as a commercial asset by the assessee himself. This view, that an asset which was acquired and used for the purpose of the business ceased to be a commercial asset of that business as soon as it was temporarily put out of use or let out to another person for use in his business or trade, was not accepted by the Supreme Court. They specifically stated : The yield of income by a commercial asset is the profit of the business irrespective of the manner in which that asset is exploited by the owner of the business. It follows from the above that the rental income realised by the assessee in the present case by letting out the entire machinery is no less the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee should be business income, it should be produced by the assessee utilising the business assets itself. So long as those assets are used as business assets, it is irrelevant whether the business assets are exploited and used by the assessee itself or someone else. The Tribunal thought that even this case was distinguishable for the reason that the judgment opened with the sentence, The decision of this reference may turn on what, in our opinion, is essentially a question of fact. Apparently, the Tribunal took the view that the facts in this case were different justifying its conclusion. It seems to us that no such distinction is available in this case. On behalf of the Department the same reasons which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Mills Co. Ltd. [1958] 34 ITR 155 , where there was a clear indication of the fact that the company was ordered to be wound up and the business of manufacturing textiles by the company was wholly given up. It may also be mentioned that on behalf of the assessee before us it is stated that in the subsequent year the assessee recommenced his business. There is one other circumstance which inclines us to the view that the assessee had not ceased to do business. The business of the assessee consisted in purchasing groundnut, expelling oil there from and selling oil and cake as the resultant products of the manufacture. The business accordingly included also the disposal of the products of the factory. There is clear evidence on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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