TMI Blog1984 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... facts as stated by the Tribunal relevant to the question may be quoted: " The assessee is a private limited company incorporated on January 10, 1959. For the year under reference, a return had been filed disclosing an income of Rs. 2,622. It set up its factory in 1959 for the manufacture of cables. For some reason or the other, the manufacture of cables could not be started till the year 1961, when the factory building was leased out on a rent of Rs. 750 per month. The income from the lease of the factory was assessed as 'Income from other sources' after allowing reasonable expenses from year to year ". In this particular assessment year, the assessee claimed that the income arising from letting out should be treated as income arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajindra Flour and Allied Industries P. Ltd. [1981] 128 ITR 402 and CIT v. Northern India Theatres P. Ltd. [1981] 128 ITR 497, it was held that the income was not from " other sources", but was from business. The judgment in both cases was delivered by one of us (Kapur J). In Addl. CIT v. Kanta Behan [1983] 140 ITR 187, it was held that the income was from "other sources" and not under the head "Income from house property". The decision in such cases naturally turns on the facts of each particular case. In the case of Addl. CIT v. Rajindra Flour and Allied Industries P. Ltd. [1981] 128 ITR 402 (Delhi), a flour mill was set up as a business venture, but some adverse and difficult circumstances arose which made it impossible for the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial practice and the judgment is best explained by reference to this method of running cinema shows. There being a producer, a distributor and an exhibitor, the actual profits of a film come from showing the film in the cinema which have to be distributed among the three parties in a particular manner. So, if the exhibitor gets a fixed hire from some other person, who runs the cinema, it is practically the same as he would have got if he had run the cinema himself. In the case of Addl. CIT v. Kanta Behan [1983] 140 ITR 187 (Delhi), there was a cinema which was let out at Rs. 3,000 per month, which was treated as property income starting from the assessment year 1950-51. As a result of rectification proceedings in the assessment years 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essation of business, but was a commercial exploitation of the asset. It may be mentioned that the asset would otherwise have been unproductive of income. In New Savan Sugar and Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC) and Narain Swadeshi Weaving Mills v. CEPT [1954] 26 ITR 765 (SC), the conclusion was that the asset in question was let out and there was no business involved in the letting. In other words, the asset ceased to be a commercial asset in the hands of the assessee. In another case, Sultan Brothers Private Ltd. v. CIT [1964] 51 ITR 353 (SC), hotel was let out. It was held by the court on the construction of the terms of the lease that the asset in question had ceased to be a commercial asset. Thus, in each case, what h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her agency. If the asset remains a commercial asset in the hands of the assessee after the letting out arrangement has been made, the income continues to be classed as business income. But if it ceases to be a commercial asset, then the income has to be taxed as income from " Other sources In the present case, there are no facts indicating that the asset in question, i.e., the factory, continued to be a commercial asset even after the letting out. The Tribunal has quoted from the judgment of Mahajan J. (as he then was), in the case of CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451, mentioned above. It is convenient to quote a part of that quotation. It was said (p. 455 of 20 ITR): " The yield of income by a commercial asset is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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