TMI Blog1985 (1) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company. This is background explained before us by Shri R. N. Bajoria, the ld. Representative for the assessee. 3. The common issue involved in these four appeals is whether the lease rent received by the assessee during the four assessment year under consideration viz., 1976-77, 1977-78, 1978-79 and 1979-80 is assessable under the head "business" or under the head "other sources". For the asst. yr. 1976-77, the ITO made the assessment under s. 143 (3). In this assessment, the ITO stated that the business of the assessee was the manufacture and sale of fire-bricks but the business income was nil. He computed the income from "other sources" at a loss of Rs. 409. He specifically stated in that order that the loss was to be carried forward to future years as if it is a business loss. this assessment order was passed on 24th Feb., 1977. Subsequently, this order was rectified by an order dt. 6th Sept., 1980 by which the business loss computed was increased to Rs. 9.050. Even in this order the ITO gave a direction to carry forward this loss to future years on the footing that loss arose from the business carried on by the assessee. Still later, on 27th Feb., 1982, the ITO pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on never was to discontinue the business altogether. The stock of finished goods which was available on the date of the lease was subsequently sold. The losses was manufacturing fire-bricks. The assessee could not get the assets back until the debenture holders were fully paid up as per the orders of the High Court. Under theses circumstances, the assessee's intention was to exploit its assets in a different way, viz., instead of running the business itself it allowed its assets to be worked for profit by another person in consideration of a fixed amount. He urged that the decision of the ITO of the contrary has not been supported by any authority and a doubtful conclusion may perhaps be arrived at by the ITO only after a long-drawn debate and arguments. Such a course of action is not permissible under s. 154 vide decision of the Supreme Court in the case of ITO vs. Volkart Brothers Ors. (1971) 82 ITR 50 (SC). Shri Bajoria then took us through the original assessment orders for the subsequent three assessment years. In the assessment order for 1977-78, the ITO has stated the heads as "business income" and then stated "other sources". He has invoked s. 140A(8) which applies only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not deem it fair to pursue that matter any further as it did not lose anything. He pointed out that the question before the Tribunal was something different. Similarly, in the asst. yr. 1977-78 also, the assessee contested the same matter before the AAC. The same position continued in the subsequent year also. However, the AAC did not accepts the claim of the assessee that the correct head of income was "business" as had always been adopted in the file of the assessee. Since the loss determined in the earlier year was actually set off against the income determined in these years, the assessee did not see any point in proceeding further on the technical point. The assessee had already got what it had wanted and the intention of the assessee to continue the business was clear just like the intention of the ITO to treat the income of the assessee as "business". Under the circumstances, Shri Bajoria urged that there was no case for rectifying these orders under s. 154 to hold that the income derived by the assessee as lease rent was assessable under the head 'other sources'. 7. Shri K. Subba Rao, the ld. Representative for the Department, on the other hand, supported the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture and sell the goods. Subsequently, because of labour trouble and other difficulties, the assessee decided to exploit those very assets through another person. Under the circumstances, the income derived by the assessee as lease-rent out of leasing out those commercial assets had been rightly assessed as business income in the original assessments. There are a number of authorities in support of this proposition and they have been stated by the assessee in its letter dt. 24th Feb., 1982 addressed to the ITO. We may refer for our support only to one decision out of the above viz. [CIT vs. Premchand Jute Mills Ltd. (1978) 114 ITR 769 (Cal)]. The principle for determining the head of income under which lease-rent has to be assessed has been laid down in that case. Applying this test to the facts of the present case, we find that there is evidence of exploiting of commercial assets. The exploitation by a person other than the assessee was temporary and has been occasioned by the order of the Hon'ble High Court in appointing a Receiver. The assets remained as commercial assets even in the hands of the lessee who exploited the same as such. All the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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