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Issues Involved:
1. Whether the income of the assessee from lease rent was assessable as business income u/s 28 of the I.T. Act, 1961, or as income from other sources u/s 56 of the said Act. 2. Whether the sum of Rs. 3,033 spent in connection with the lease agreement is an expenditure of a revenue nature incidental to the assessee's activities u/s 37 or u/s 57(iii). Summary: Issue 1: Assessment of Lease Rent Income The court examined whether the income from the lease rent was assessable as business income u/s 28 or as income from other sources u/s 56. The assessee, a private limited company running a jute mill, had leased out its factory due to financial difficulties. The Tribunal had held that the rental income was assessable as business income, considering the intention to exploit the commercial asset. The court noted that the company had not ceased to carry on the business and intended to exploit the asset commercially, evidenced by efforts to raise funds and settle disputes with workers. The lease terms indicated that the asset was to be maintained as a commercial asset for future exploitation. Thus, the court upheld the Tribunal's decision that the lease rent was assessable as business income u/s 28. Issue 2: Nature of Expenditure on Lease Agreement The court addressed whether the expenditure of Rs. 3,033 on the lease agreement was of a revenue nature incidental to the assessee's activities. Given that the lease income was considered business income, the court concluded that the expenditure was indeed of a revenue nature incidental to the assessee's business activities u/s 37. Conclusion: The court answered both questions in favor of the assessee, stating that the income from lease rent was assessable as business income u/s 28, and the expenditure of Rs. 3,033 was of a revenue nature incidental to the assessee's business. The parties were ordered to bear their own costs.
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