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TMI Blog2002 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal was right in ignoring the order passed in the wealth-tax appeal, relating to the assessment year 1989-90, wherein it was held that the factory in question was a commercial asset?" Question No. 1: Learned counsel took us through the orders and it is his contention that in the light of the facts and circumstances obtained, the income which the assessee-company has derived by letting out its land and buildings should be treated as a business income, which finding has been rejected by all the authorities below. A few admitted facts would be necessary to appreciate the contention. The assessee-company was formed in the year 1950 and its main object was to erect and work silk mills for large scale production of all kinds of silk, artificial silk, mixed, mercerised and similar fabrics. In the memorandum of association, there are certain other clauses also, which authorised the company to carry on any other business which may enhance the value or render profits by any of the company's properties or rights. This is particularly to be found at clause No. 27 of the memorandum of association. The company, after initial teething troubles went further into losses with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness. The Tribunal also found that the leases were granted somewhere in the year 1971 and the extent of the leased out area was extended from time to time. It also came to the conclusion that there was nothing on record to suggest that the company could again take up industrial or manufacturing activity or that it had made any efforts to do so. From this, the Tribunal came to the conclusion that the income could be viewed only as "income from other sources" and not a "business income". Learned counsel for the applicant pointed out that the Tribunal had relied upon the Supreme Court judgment reported in Universal Plast Ltd. v. CIT [1999] 237 ITR 454, in which the Supreme Court had formulated four principles and had held that, where it could not be seen that the assets were let out with the idea of restarting the business or reviving the business, then the income from the assets being let out could not be said to be business income. The following extract from the Supreme Court judgment has been quoted by the Tribunal: "The general principles relating to income from leasing out the assets of the business by an assessee are: (1) no precise test can be laid down to ascertain wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Bank's case [1959] 37 ITR 171 (SC), where one of the objects in the memorandum of association pertained to realisation of rental income of the assessee and therefore, it was held that since the realisation of rental income was in the course of business being in prosecution of one of its objects in the memorandum it was included in the business profits and was assessable to excess profits tax. Before coming to the conclusion and laying down the law as has been quoted above, the apex court had undoubtedly taken into consideration the factor of memorandum of association providing for such rental income. It cannot be, therefore, said that in laying down the law and crystallising it to the four points as stated by us, the Supreme Court had taken into consideration the question of there being such a permissive clause in the memorandum of association. The argument, therefore, must fail that the Supreme Court judgment is not applicable to the present case on account of the fact that in the present matter the memorandum of association permits the company to exploit its property in a better manner as per clauses 27 and 33 of the memorandum of association. Now going back to the argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a relevant question. Be that as it may, once it is held not to be the business income, then the controversy in this appeal would come to an end. There is another reason why we are not interfering in this matter. As per the second point in the apex court judgment, the question as to whether it amounts to business income or not is a mixed question of law and fact. Under section 260A, our jurisdiction is now restricted to consider only substantial questions of law in order to entertain an appeal. On that count also, the assessee must fail. However, the matters do not stop here. Question No. 2: By way of second question, Mr. Jayakumar raised a very interesting question and pointed out that under the wealth-tax proceedings of this assessee, a finding has been written by the Income-tax Appellate Tribunal that the assets which were leased out were commercial assets and therefore the income from those commercial assets would always be treated as "income from business". Learned counsel also pointed out very fairly that though in the earlier order these assets were not considered to be commercial assets, the Tribunal has now considered those assets to be commercial assets. From this, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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