1985 (5) TMI 46 - HC - Income Tax

Summary

Issues:
1. Whether the income derived by the assessee was taxable under the head 'Business' or 'Other Sources' for the assessment years 1968-69 and 1969-70?

Detailed Analysis:
The assessee, who owned Ganeshdih Colliery, leased it out to managing contractors. The Income Tax Officer (ITO) rejected the claim of income from business made by the assessee and categorized it as income from "Other sources" based on the lease agreement. This decision was upheld by the Appellate Assistant Commissioner (AAC) citing the case of New Savan Sugar and Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC). However, the Appellate Tribunal disagreed and accepted the claim of the assessee, referencing their previous decision and the Punjab High Court's judgment in Nauharchand Chananram v. CIT [1971] 82 ITR 189 (P & H).

The consolidated reference made to the High Court questioned whether the Tribunal was correct in treating the income derived by the assessee as taxable under the head 'Business' instead of 'Other Sources'. The Tribunal's decision was based on the precedent set in their previous cases and the Punjab High Court's judgment. However, the High Court pointed out that their previous decision in Khas Benedih Colliery v. CIT [1974] BBCJ 440 had disapproved the Punjab and Haryana High Court's view. The principle of res judicata was deemed inapplicable to tax cases, rendering the Tribunal's grounds for the decision unsound.

The High Court analyzed the lease agreement and concluded that the assessee had completely disassociated himself from the colliery business by granting the lease to the managing contractor. It was noted that the assessee no longer had control over the business operations post-lease. Relying on legal precedents, the High Court determined that the income derived from the lease should be categorized as income from 'Other Sources' rather than 'Business'. The Tribunal's decision was deemed erroneous in this regard.

In conclusion, the High Court held that the income derived by the assessee was not taxable under the head 'Business' but should be categorized under 'Other Sources'. The reference was answered in favor of the Revenue, and the decision was made against the assessee, with costs awarded to the Revenue. The judgment was concurred by both judges, Uday Sinha and Nazir Ahmad.