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Issues:
Interpretation of lease agreement and memorandum of association for income assessment under Income-tax Act, 1961. Analysis: The judgment pertains to the interpretation of the Income-tax Act, 1961, specifically focusing on the treatment of income earned from leasing out a cold storage and ice plant. The primary issue revolves around whether the income should be assessed as profits and gains of business or under the head 'Other sources'. The assessee, a private limited company, had been leasing out the plant to a partnership firm since 1952. The income received from this arrangement was initially assessed under 'Other sources' until the assessment year 1959-60. However, in the assessment year 1960-61, the assessee contended that the income should be treated as business income. This contention was initially rejected by the Income-tax Officer but was later upheld by the Tribunal. The Tribunal based its decision on the terms of the lease agreement and relevant circumstances. It noted that the assessee had never abandoned the intention of using the plant as a business asset. The lease was renewed annually for the relevant season only, indicating a temporary arrangement. Additionally, the lease deed specified that the plant was to be insured by the lessor, although at the lessee's cost. The lessor also agreed to supply necessary materials for running the plant, with any extra requirements to be borne by the lessee. The Tribunal emphasized that the assessee's intention regarding the use of the asset was crucial in determining the appropriate classification of income. Citing established legal precedents, including the Supreme Court decision in CEPT v. Shri Lakshmi Silk Mills Ltd., the Tribunal highlighted that the assessee's intention to use the asset as a business asset during the relevant period was paramount. Given that the plant had been used for business purposes in previous years, the key inquiry was whether the assessee had abandoned the intention to utilize the asset for business. This determination was deemed a factual question, requiring an assessment of the relevant material before the authorities. In conclusion, the High Court upheld the Tribunal's decision, emphasizing that unless the Tribunal's finding was tainted by specific defects such as non-consideration of relevant material or perversity, it should not be disturbed. As no such flaws were identified in this case, the Court ruled in favor of the assessee, affirming that the income derived from leasing the plant should indeed be assessed as profits and gains of business. The judgment concluded with no order as to costs, settling the matter in favor of the assessee and against the Revenue.
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