TMI Blog2005 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... the business. Nor is there any intention that the assets will cease to be business assets - we find no error in the order of the Tribunal. - - - - - Dated:- 28-2-2005 - Judge(s) : R. V. RAVEENDRAN., SHANTANU KEMKAR. JUDGMENT The judgment of the court was delivered by R.V. Raveendran C.J.-This reference is by the Tribunal under section 256(2) of the Income-tax Act, 1961 ("the Act" for short), in pursuance of the order of this court dated January 19, 1998 in I.T.R. No. 107/1997 relating to the assessment years 1986-87, 1987-88 and 1988-89, at the instance of the Revenue. The question referred is: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified to hold that the rental income should be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was being used as office, is concerned the actual repairs were estimated and permitted. On appeal by the assessee, the Commissioner of Income-tax (Appeals), Jabalpur, by orders dated October 11, 1990, November 21, 1990 and November 21, 1990 respectively, confirmed the decision of the Assessing Officer treating the rental income as income from house property. On further appeal by the assessee, the Tribunal by a common order dated August 21, 1996 (in I.T.A. Nos. 428/Jab/1990, 63/Jab/1991 and 64/Jab/1991), held that the rental income is to be treated as business income and not as income from house property. The Revenue filed an application seeking reference. On the Tribunal rejecting the same, the Revenue filed a petition under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as "income from house property" or as "profits and gains of any business" is a vexed question. Rents or other income from the ownership of house property will normally have to be brought under the head of "Income from house property". In East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49, the Supreme Court held that even a company incorporated with the object of promoting/developing markets was assessable under section 22 and not under section 28 in respect of rental income from the market shops. In CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC) arising out of the Excess Profits Tax Act, the Supreme Court considered a case of an assessee who was carrying on the business of manufacturing silk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any's earlier losses could be set off. The said finding was affirmed by the High Court holding that the income derived by the company by way of lease rent from the letting out of its assets was assessable under the head "Profits and gains of business". The Supreme Court while affirming the decision of the High Court held: "It is predominantly a matter of intention. Intention is an inference to be drawn from the relevant facts. In each case, the intention has to be gathered as to whether the commercial asset was intended to be exploited by the assessee or whether it was intended to be used by letting it out for a temporary period ... In the context of these facts, it appears that it was a possible conclusion that the assessee intended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus of the non-factory buildings including godowns was held to be the business income of the assessee. In CIT v. Anand Rubber and Plastics P. Ltd. [1989] 178 ITR 301, the Punjab and Haryana High Court observed that in order to determine whether rent is assessable as income from property or business income, what has to be seen is whether the asset is being exploited commercially by the letting out or whether it is being let out for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case. On the facts it was found that the object of the assessee-company was to manufacture rubber goods. The factory premises of the assessee consisted of three portions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 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 the business assets otherwise than employing them for his own use for making profit for that business; but if the business never started or has started but ceased with no intention to be resumed, the assets also will cease to be business assets and the transaction will only be exploitation of property by an owner thereof, but not exploitation of business assets." Let us now refer to the facts of this case. The Tribunal on examination of the facts, the records i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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