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Issues:
The judgment addresses two main issues: 1. Whether the assessee is entitled to development rebate under section 33(1)(a) of the Income-tax Act. 2. Whether the lease income should be considered as business income. Development Rebate Issue: The assessee, an individual engaged in manufacturing and selling optical lenses, leased out plant and machinery to a private limited company while continuing his trading business. The Income-tax Officer initially denied the development rebate claim, stating that since the machinery was leased out, it was not being used wholly for the assessee's business. The Appellate Assistant Commissioner upheld this decision. However, the Tribunal members had differing opinions. The Judicial Member agreed that the lease income was business income but believed development rebate should not be allowed due to the machinery not being wholly used for the business. In contrast, the Accountant Member considered the lease income as business income and supported granting development rebate. The Vice-President sided with the Accountant Member, emphasizing that once leasing out machinery is viewed as a business activity, development rebate should be allowed. The High Court concurred with the Vice-President, stating that if leasing out machinery is a business mode and income is business income, it logically follows that the machinery is wholly used for the business, satisfying the requirement for development rebate. The Court upheld the Tribunal's decision in favor of the assessee. Lease Income Classification Issue: Regarding whether the lease income should be considered as business income, all three Tribunal members unanimously agreed that the leasing out of machinery should be deemed a business activity based on the lease terms and duration. The High Court upheld this finding, concluding that the lease income is indeed business income. Consequently, both issues were resolved in favor of the assessee against the Revenue, with no costs awarded.
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