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Issues Involved:
1. Whether the income from the lease was assessable under the head 'Business' for the assessment years 1970-71, 1971-72, 1972-73, and 1973-74. Summary: Issue 1: Assessability of Income from Lease under the Head 'Business' The primary issue in this case was whether the income derived from leasing out a factory by Aryan Industries Ltd. should be assessed under the head 'Business' or 'Income from other sources' u/s 56 of the I.T. Act. The assessee had entered into several lease agreements with Tungabhadra Industries Ltd., culminating in a long-term lease agreement dated January 4, 1969, extending the lease period to 18 years. The Department initially assessed the income from these agreements as business income but proposed to change the head of income to 'Income from other sources' after the long-term agreement was entered into. The Tribunal, however, held that the income should continue to be assessed under the head 'Business', as the assessee had not ceased to exploit the factory as a commercial asset. The Tribunal's decision was based on several clauses in the agreements, such as the continuation of the assessee's workers and supervisory staff, the maintenance of industrial licenses in the assessee's name, and the provision for the assessee to purchase raw materials and manufactured products at the end of the lease period. The Tribunal concluded that these clauses indicated the assessee's intention to continue using the factory as a commercial asset. The Department contended that the long duration of the lease (18 years) indicated that the assessee had abandoned its intention of doing business and was merely exploiting the factory as an income-yielding property. The Department relied on the Supreme Court decision in New Savan Sugar and Guy Refining Co. Ltd. v. CIT [1969] 74 ITR 7, which held that income from a factory leased out for a long period should be assessed as 'Income from other sources'. However, the High Court noted that the question of whether an asset is used as a commercial asset or as an income-yielding property is a question of fact to be determined based on the specific circumstances of each case. The Court found that the Tribunal's conclusion was justified based on the cumulative consideration of the facts and circumstances, including the broad and liberal test evolved by the Supreme Court in CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451, which supported the view that the income from the lease should be assessed as business income. The High Court thus answered the question in the affirmative and in favor of the assessee, holding that the income from the lease was assessable under the head 'Business'.
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