TMI Blog1974 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... rels arose among the members of the two families resulting in a practical deadlock in the management of the assessee-company. Since it was found impossible to work the mill due to these difficulties, an arrangement for leasing out the mill to M/s. Soorajmul Nagurmall was thought of in 1956. But this arrangement could not be put through. Three of the directors who did not belong to these groups applied to the Central Government on the 3rd of February, 1958, to intervene and direct an investigation into the affairs of the company. Due to the mediation of the jute Controller the parties came to a settlement on the 7th March, 1958, as to the terms and conditions on which the mill were to be run. Therefore, it is apparent that the company's affairs were not very prosperous. Even earlier, these were none too good. The boilers in the mill had been deprecated by the inspector of boilers in 1946 and this had led to the closing of the factory for about one and a half years resulting in a loss of Rs. 19.02 lakhs by the 15th October, 1946. There were some profits thereafter till the 13th April, 1951, but there was again loss and as on the 13th April, 1956, the company's losses amounted to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the mill as a commercial asset though certain circumstances compelled it to let it out and not to run it as before. The Tribunal found that though there was a deadlock in the affairs of the company which had made it impossible to run it or even lease it out, this problem was solved in 1958. The company had no doubt suffered losses and its machinery was also not up-to-date. Yet it was resolved to raise a working capital somehow and run the mill. If the company had intended to go out of the business, the directors could have easily approved of the proposal for leasing out the mill which had been mooted previously but it was clear that they did not decide to do so and wanted to run the mill themselves. The company had also placed orders for electrical machinery to enable the running of the mill by electric power at a cost of about Rs. 5 lakhs and the Tribunal observed that one could understand the desire of the company to continue to run the mill and at a profit, the differences having been resolved. The Tribunal considered the lease and the annual report of the directors and found that the company did not go out of the business altogether. On a perusal of the terms of the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistry of Commerce and Industry, Government of India, New Delhi, by some of the directors of the asscssee-company in which the directors after stating, inter alia, that the loss of the company had been partially due to the high price of raw jute in relation to the market for manufactured goods, narrated the liabilities of the company, and thereafter went on to say that for want of finance there was risk of the work of the mill being stopped with the result that about 2,500 workers of the mill would be thrown out of employment and there would be great commotion, agitation and chaos and the company's properties and assets in the mill might be destroyed. The directors, therefore, prayed that there should be thorough investigation by the Central Government under section 15 of the Industries (Development Regulation) Act, 1951, and for taking such steps as might be thought fit and proper after investigation. The shareholders of the company agreed to certain settlement which is recorded in the letter to the Jute Controller dated the 11th March, 1958, which also indicated a desire to carry on the business by making a settlement of the disputes for the purpose of carrying on the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssor as a member in respect of the demised premises. It also imposed upon the lessee the obligation not to alter, take down or remove any machinery or fixture without the prior permission of the lessor provided that the lessee would be entitled to take down or remove any machinery or fixture for the purpose of repair and/or replacement. Apart from the obligation of paying the employees' contribution and to keep in working order and not to transfer or sub-let, there was the obligation that at the expiry or sooner determination of the lease to deliver up possession of the demised premises together with all plant, machinery and fixtures in proper working condition, wear and tear, damage by fire, earthquake and other forced injury being excepted. The lessor covenanted to apply all moneys as soon as received by virtue of the policy of insurance for reinstating, rebuilding and restoring the demised premises and machinery with the said moneys as far as possible. It further imposed upon the lessor the obligation to purchase the entire jute-in-process at the mill at the then market rate or at the rate mutually agreed upon. The lessor, however, would not be in any way liable for any contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was urged that there being no specific question with regard to this, it was not possible for this court to go into the question of validity of that finding. Counsel for the revenue, however, rightly pointed out in our opinion, that whether a particular asset was a commercial asset or not and whether use of commercial asset was the exploitation of commercial asset or not, could not be said to be a finding on pure fact ; it was a mixed question of law and fact. For determining whether an asset is commercial or otherwise, it is the use to which it is put that gives it the characteristic of being commercial or non-commercial asset. A building, a car or a house may be a non-commercial asset or commercial asset depending upon the purpose and the user of it. In this case, reliance was placed by counsel for the revenue on the decisions in the cases of Commissioner of Excess Profits Tax v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451, 456 (SC), Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1954] 26 ITR 765, 773 (SC), Sultan Brothers P. Ltd. v. Commissioner of Income-tax [1964] 51 ITR 353, 358 (SC) and New Savan Sugar Gur Refining Co. Ltd. v. Commmissioner of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that letting out was not doing of business but the enjoyment of a property by the owner. It is difficult and, in our opinion undesirable, to compare term by term the lease of one case with the lease or facts of another case. These cannot ever be in all respects the same. We have to find out, as mentioned before, the fact whether the intention of the assessee was that the asset should be treated as commercial asset and exploited as such. That can only be found out from the circumstances and the background of the facts leading to the leasing out of the property, the conduct of the parties prior to or at the time and the terms and conditions of the lease. In the instant case, we have noticed that the parties wanted to settle the deadlock ; there were heavy losses due to more than one factor, namely, quarrels between groups of directors and heavy costs ; they attempted a settlement through the mediation of the Central Government's investigation. These indicated not the desire not to carry on the business or wind up the business but to regularise the business and to carry on and to exploit commercial asset more fully and economically. Then there was an attempt of settlement through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent year ? " The answer to this question depends upon the question whether the income derived from the letting out was the income from the same business in which loss had occurred previously. Counsel for the assessee drew our attention to the several decisions on the question as to whether the business of different activities carried on by the assessee should be considered the same business. Reliance was placed on the decision in the case of Mundulpoor Coal Co. Ltd. v. Commissioner of Income-tax [1965] 58 ITR 199 (Cal) of this court and on the decision of the Supreme Court in the case of Standard Refinery Distillery Ltd. v. Commissioner of Income-tax [1971] 79 ITR 589 (SC). It is true that if there are different activities of two businesses whether the same result in the same business or not has to be found out by judging whether there is sufficient amount of interlacing or inter-connection or dovetailing between those two activities so as to be linked up and considered as the same. But this principle, in our opinion, would not apply in a case where income is by doing of business by the exploitation of the same asset which used to be exploited by the assessee himself prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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