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Issues involved: Assessment of business income when no business activity was conducted, justification of letting out properties as business activity, deduction of legal expenses.
Assessment of business income: The case involved a public limited company that had stopped its business activities from January 1, 1965. The Income Tax Officer (ITO) assessed the company's income derived from business up to the assessment year 1971-72, despite the lack of business activity during a certain period. Disagreements arose between the ITO, the Assistant Commissioner, and the Appellate Tribunal regarding whether the letting out of properties constituted business activity. The court discussed the lack of a general principle to determine when a business concern has not carried on any business, citing previous Supreme Court cases. The court analyzed various documents and the conduct of the company to ascertain its intention to revive the business, ultimately concluding that the company exhibited no intention to do so. Justification of letting out properties: The company had let out its factories and godowns to tenants during the period when no business activity was conducted. The court examined the circumstances surrounding the letting out of properties and the company's explanations for the same. Despite arguments presented by the company's counsel regarding the continuity of certain business aspects, the court found that there was no intention on the part of the company to revive its business based on the evidence available. Consequently, the court ruled in favor of the Revenue and against the assessee. Deduction of legal expenses: The second question involved the disallowance of legal expenses claimed by the company for specific assessment years. The ITO rejected certain claims, while the Appellate Assistant Commissioner (AAC) allowed some deductions. The Appellate Tribunal ultimately upheld the ITO's decision. The court analyzed the applicability of relevant provisions of the Income Tax Act and concluded that the legal expenses were not deductible as they did not meet the criteria of being wholly or exclusively for the purpose of earning income. The court returned the question in favor of the Revenue and against the assessee. The judgment addressed the assessment of business income in the absence of business activity, the justification of letting out properties as a business activity, and the deduction of legal expenses, providing detailed analysis and legal interpretations to resolve the issues at hand.
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