2012 (4) TMI 670 - AT - Income Tax

Income from lease rent is assessable under the head Income from business - Held that - The undisputed facts are that the assessee has leased out its plant and machinery in the year 1995. Hence while considering the claim of the assessee for the years ending 31.3.1996 and 31.3.97 the Tribunal held that there is nothing on record to show that the assessee had no present intention to revive its business at appropriate time as the gap between the year of closure and the years under consideration at that point of time was very narrow. We are concerned with the assessment year 2007-08 and we have to consider the facts and circumstances prevailing as on 31-03-2007. About 12 years have passed and hence we are in agreement with Ld D.R that the assessee has not brought on record any material to show that it has intention to revive its business activities. AR submitted that steps are being taken to revive the business yet we are unable to accept his contention for want of supporting materials. Accordingly in our view the Ld. CIT(A) was not correct in placing reliance on the decision of the Tribunal without appreciating the facts prevailing in the year under consideration.

Summary

Issues:
Whether the income from lease rent should be assessed under the head "Income from business" or "Income from other sources."

Analysis:
The appeal filed by the Revenue challenged the order of the Ld. CIT(A) holding that the assessee intended to revive business activities, thus making the income from lease rent assessable under the head "Income from business" for the assessment year 2007-08. The assessee had leased out its plant and machinery to another company and claimed the lease rent as business income, while the Assessing Officer assessed it under "Income from other sources."

The Ld. DR argued that since the assessee had not commenced the business since 1995, the income from lease rent should be categorized under "Income from other sources." On the other hand, the Ld. AR contended that previous decisions by ITAT in the assessee's case supported the claim that the intention to continue business activities existed, citing a similar view taken by the Bench for the assessment year 2003-04.

The Tribunal emphasized that the determination of the assessee's intention to revive business activities is a factual inquiry based on the circumstances of each year. While previous decisions favored the assessee due to a narrow gap between closure and assessment years, the Tribunal found that for the assessment year 2007-08, over 12 years had passed without concrete evidence of intent to revive business. Despite the Ld. AR's assertion of steps being taken, the Tribunal noted the lack of supporting materials, leading to the reversal of the Ld. CIT(A)'s decision and restoration of the Assessing Officer's view.

In conclusion, the Tribunal allowed the Revenue's appeal, ruling that the income from lease rent should be treated as "Income from other sources" for the assessment year 2007-08.