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Determining if income derived from rent of assets is business income assessable under section 10 or income from property assessable under section 9 of the Indian Income-tax Act, 1922. Analysis: The case involved the question of whether income derived from the rent of assets by a public limited company, which had ceased its cotton pressing business, should be classified as business income under section 10 or income from property under section 9. The assets in question included buildings, godowns, and machinery. The company had stopped its cotton pressing business in 1950 and decided to let out the buildings while planning to sell the machinery. The company contended that the rental income was business income, but the tax department argued it should be assessed under section 9. The Tribunal and Appellate Assistant Commissioner rejected the company's appeal. The court highlighted the distinction between income from property and business income under sections 9 and 10 of the Income-tax Act. It emphasized that the classification depends on the nature of the assets and their relation to the assessee's activities. The court discussed the concept of commercial assets and their treatment under the Act, emphasizing that income derived from the use of commercial assets for business purposes falls under the business income category. The court referred to precedents and emphasized that each case must be decided based on its unique circumstances. The court analyzed previous cases, including Commissioner of Excess Profits Tax v. Shri Lakshmi Silk Mills Ltd., to determine the treatment of income derived from commercial assets. It discussed scenarios where assets were let out but not used for business purposes and clarified the criteria for categorizing income as business income. The court distinguished cases based on the continuous exercise of business activities and the nature of transactions. It emphasized that the determination of income classification depends on ordinary principles and the specific facts of each case. In the present case, the court concluded that the company had ceased its business activity in 1950 and intended to sell the machinery, which was not let out. As the company's business had stopped, the assets were no longer part of the business asset, leading to the income from property rentals being assessable under section 9. The court rejected the company's claim for business income classification and ordered costs to be borne by the assessee. The reference was answered accordingly, with the advocate's fee set at Rs. 200.
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