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TMI Blog1986 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery for a consideration of Rs. 1,34,246. The Income-tax Officer recorded that the cost or the written down value of the said old machinery could not be ascertained by the assessee and, therefore, adjustment of profits on sale of the same could not be made. The Income-tax Officer added the entire amount of Rs. 1,34,246 to the total income of the assessee. In the assessment year 1970-71, the assessee claimed a deduction of Rs. 42,755 stated to have been spent on account of repairs of its buildings including godown. The Income-tax Officer held that the assessee had failed to furnish detailed evidence and that the income from the said godown should be treated as income from property to be considered separately. He, therefore, disallowed the said deduction from the business income of the assessee and added back the same. In the assessment year 1971-72, the assessee claimed before the Incometax Officer that the godowns were its commercial assets and that the income from letting out of such commercial assets should be treated as its business income and not as income from property. The assessee claimed that the business of the assessee in jute had been suspended temporarily but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived thereby had been shown as income from property, though, in the earlier years, the assessee had been carrying on its business and had sold jute in large quantities. Only during the relevant accounting year, no sale of jute has been shown on the ground of cessation of work due to labour and financial troubles. The Commissioner found that there was no relation between the cessation of the business of the assessee and the letting out of the godowns and that such letting out was not a temporary phenomenon. He held that the alleged commercial assets had been let out not for business but for other purposes. There had been subletting of the said godowns by some of the original tenants . It was found that the godowns let out had not been used in business at all and had lost their commercial character. The Appellate Assistant Commissioner accordingly upheld the order of the Income-tax Officer treating the amount received from letting out the godowns under the head " Income from house property ". Being aggrieved, the assessee preferred further appeals before the Tribunal in respect of both the assessment years. Before the Tribunal, the assessee for the first time contended that the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale proceeds of the discarded machinery or plant should be deducted from the aggregate written down value of the entire machinery and plant. It was contended on behalf of the assessee that this circular of the Board was binding on the Revenue. It was contended further on behalf of the assessee that in any event, the said circular laid down a manner of interpretation or guideline for the Revenue which was practical and should be followed. It was contended on behalf of the Revenue that the circular was ancient and should not be followed. It was also contended that this circular might have been withdrawn. It was held by the Tribunal that there was no evidence that the said circular had been withdrawn at the material time. The Tribunal accepted the circular and held that where no written down value could be ascertained, the sale proceeds of old machinery should be regarded as the written down value for which no profit could be held to accrue to the assessee. The Tribunal directed the Income-tax Officer to delete the said amount of Rs. 1,34,246 from the total income of the assessee. On the disallowance of Rs. 42,755 spent on account of repairs to the godowns in the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to provide for depreciation before it could declare any dividend. The Tribunal found that the business of the assessee in jute had been continued in the subsequent year. The Tribunal also noted that depreciation had been allowed in respect of the godowns all along. The Tribunal held that even if the income from the godowns would be chargeable under the head " Income from house property ", the godowns had been treated in the balance-sheet as commercial assets of the assessee in the past on the basis of which depreciation had been allowed. The Tribunal held that loss from its business could be set off against income from godowns which were held as commercial assets. The Tribunal held that income from godowns was required to be assessed under the head "Income from house property " but the assessee was entitled to set off its business loss of earlier years suffered in respect of jute business against the rental income from godowns. On the question of interest, it was contended by the assessee that no interest could be charged under section 139(1) where the Income-tax Officer had not extended the time for filing of the return. The said contention of the assessee was acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m godowns ?" On the common question No. 1 for the assessment years 1970-71 and 1971-72, the learned advocate for the assessee drew our attention to the decision of the Supreme Court in Gurjargravures (P.) Ltd.'s case [1978] 111 ITR 1, and a decision of this court in Madhu Jayanti P. Ltd. v. CIT [1985] 154 ITR 277. In Gurjargravures (P.) Ltd.'s case [1978] 111 ITR 1, the Supreme Court held that the assessee was not entitled to claim relief under section 84 of the Act by way of exemption where such claim had not been made before the Income-tax Officer at the time of the assessment nor was there any material on record supporting such a claim except that in a subsequent year such relief had been granted to the assessee. The Supreme Court, however, made it clear that they were not considering a case where the assessee failed to make a claim though there was evidence on record to support it. In Madhu Jayanti P. Ltd.'s case [1985] 154 ITR 277, this court considered the decision of the Supreme Court in Gurjargravures (P.) Ltd.'s case [1978] 111 ITR 1, as also decisions of the other High Courts on the question. In the facts of this case, it was found that where the assessee had made a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by us. The decision of the Tribunal was upheld by this court, inter alia, on a similar issue in Raigharh Jute Mills Ltd.'s case [1981] 132 ITR 702. We answer the common question No. 2 in the affirmative and in favour of the assessee. On the common question No. 3 for the assessment years 1970-71 and 1971-72, the learned advocate for the assessee cited two decisions of this court. The first was CIT v. Lalit Prasad Rohini Kumar [1979] 117 ITR 603. In this case, it was held by a Division Bench of this court that where a person denied his liability to be chargeable to interest at all under the Act, he would in fact be denying his liability to be assessed under the Act and his contention though only in respect of interest would be covered by clause (c) of section 246 of the Act. It was held that in this context the question of levy of interest could be agitated in an appeal. It was, however, held that where the liability to pay interest as such was not being denied by the assessee but only the imposition of interest was being challenged either being excessive or not being made in the regular course, an appeal would not lie in such cases. The same question came up again before this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obsolete. The Tribunal, however, held that there was no evidence adduced by the Revenue to show that the circular had been withdrawn and, therefore, the same was held to be valid and effective. The Tribunal also held that, even otherwise, the computation suggested by the circular was practical and there was no reason why it should not be followed. On a consideration of the respective contentions of the parties, it appears to us that where the original cost or the subsequent written down value by adjustment of depreciation cannot be determined, it would not be proper to assume that the written down value of such machinery should be treated as nil and that the entire amount realised from the sale of such machinery should be treated as profits and included in the income of the assessee. We also cannot ignore altogether the circular dated August 21, 1940, which was binding on, and had been followed by, the Tribunal. It is also equally correct that there was no evidence to hold that the price realised from the sale of the said machinery did not exceed the written down value of the same and no part of such price could be included in the total income of the assessee. On the evidence on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess income and taxable as such as it was shown that the intention of the lessor was that during the period of the lease the assets let out must remain and be treated as commercial assets and exploited as such, (d) such intention of the lessor was to be ascertained from the cumulative effect of the entire terms of the lease and other materials. CIT v. Katihar Jute Mills (P.) Ltd. [1979] 116 ITR 781 (Cal) : In this case, the principles laid down in Everest Hotels Ltd.'s case [1978] 114 ITR 779 (Cal) were applied to the facts and it was held that where the assessee had temporarily stopped its business of running a jute mill because of financial difficulties but bad exploited its commercial assets by letting out the mills on a lease in the meantime and where the different clauses of the deed of lease manifested an intention on the part of the assessee that the assets would be maintained as commercial assets till the expiry of the, lease and also where the assessee had retained some of its commercial assets, the same would go to show that the assessee wanted to retain the assets as commercial assets and also to exploit the same as commercial assets by letting it out. The rent received ..... X X X X Extracts X X X X X X X X Extracts X X X X
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