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Issues Involved:
1. Whether the rental income of Rs. 20,005 received by the assessee from letting out the dyeing plant is income from business under Section 2(5) of the Excess Profits Tax Act. 2. Whether the said income falls under Section 12 of the Income-tax Act as profits and gains from other sources. Detailed Analysis: Issue 1: Income from Business under Section 2(5) of the Excess Profits Tax Act The Tribunal held that the sum of Rs. 20,005 received by the assessee from letting out the dyeing plant was income from business. The core question was whether this income could be considered as profits from business within the meaning of Section 2(5) of the Excess Profits Tax Act. The contention from the Commissioner was that the dyeing plant was a commercial asset of the assessee's business. The income derived from letting it out should be considered business income, regardless of whether the asset was used by the assessee himself or by someone else. However, the Court emphasized that the commercial asset must be in a condition to be used as such by the assessee when let out. If the asset had ceased to be a commercial asset, then income from letting it out would not be business income. The Court referred to several cases to establish this principle: 1. Sutherland's Case: The ship was a commercial asset used for different purposes, and income derived from its use was considered business income. The key factor was that the ship had not ceased to be a commercial asset. 2. Ensign Shipping Co. Ltd. v. Commissioners of Inland Revenue: Compensation received for the use of ships detained by the government was considered a trading receipt since the ships were commercial assets at the time of detention. 3. Sadhucharan Roy Chowdhry, In re: Rent received from leasing a jute press was considered business income because the jute press was a commercial asset. In contrast, the Court also considered cases where the asset had ceased to be a commercial asset: 1. Inland Revenue Commissioners v. Broadway Car Co. (Wimbledon) Ltd.: The land sub-let by the company had ceased to be a commercial asset due to reduced business needs, and thus the rent received was considered an investment. 2. Inland Revenue Commissioners v. Iles: Royalties from allowing other companies to excavate gravel were considered investments because the land had not been used by the assessee for business purposes. Applying these principles, the Court found that the dyeing plant had ceased to be a commercial asset due to the war, which made it impossible for the assessee to use it. Therefore, the income derived from letting it out was not business income. Issue 2: Income under Section 12 of the Income-tax Act The assessee argued that the rental income should fall under Section 12 of the Income-tax Act as profits and gains from other sources. Section 12 applies when the income does not fall within any of the heads of income enumerated in Section 6 of the Income-tax Act. If the income is from business, Section 12 does not apply. The Court noted that Section 12(3) provides allowances for letting out machinery, plant, or furniture, indicating that such income is not inherently considered business income. However, this section applies only if the income does not fall under any of the heads in Section 6, including business income. Given that the dyeing plant had ceased to be a commercial asset, the rental income was not business income and thus fell under Section 12 as income from other sources. Conclusion The Court concluded that the rental income of Rs. 20,005 received by the assessee from letting out the dyeing plant was not income from business under Section 2(5) of the Excess Profits Tax Act. Instead, it was income from other sources under Section 12 of the Income-tax Act. The Tribunal's decision was overturned, and the question was answered in the negative, with the Commissioner ordered to pay the costs.
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