9911796707
TMI Blog1984 (8) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... llows : The assessee is a public limited company incorporated under the Companies Act, 1956. The assessee-company owned a printing machinery at Baroda and a distillery plant at Whitefield near Bangalore. It had let out the printing machinery to M/s. Alembic Chemical Works Co. Ltd., Baroda, on the following terms . "(i) the lease is for a term of five years commencing from February 1, 1972, on a monthly rent of Rs. 651. (ii) the assessee has to repair and keep in proper working order, the said machinery and all additions thereto throughout the term of 5 years and to substitute the same with fittings, parts, etc., as and when necessary." The distillery plant was let out to M/s. Nirayu Associates on the following terms : " (i) The Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r who upheld the order of the Income-tax Officer. The assessee then preferred a second appeal before the Income-tax Appellate Tribunal, which also concurred with the findings of the Income-tax Officer. The Tribunal noted that the assessee, which is a limited company, is one of the Alembic Group of Companies ; that the assessee had purchased the printing machinery in January, 1972, and directly installed the same in the premises of the lessee company at Baroda. The assessee never carried on any printing business of its own and never utilised the machinery for any printing work of its own. The Tribunal also further took note of the fact that although the lease was for five years, it was terminated in April, 1975, and, thereafter, the machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, according to ordinary common sense principles. However, it was emphasised that if the object of letting out the asset is to earn a profit in the ordinary course of its business, it results in business income. On the other hand, if the object of letting out the asset is merely to earn rent as owner of the asset, such income would be from " other sources", if there is no other indication to show that such asset is treated as its commercial asset and a business is sought to be carried on by the assessee. Mr. Sarangan, learned counsel for the assessee, vehemently contended that the lease of machinery and plant contemplated in the agreements, dated September 1, 1972, and November 10, 1972, was lease of commercial assets and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion, the Tribunal has relied upon yet another circumstance. It has noted that the assessee had always treated the assets in question as fixed assets and not in the nature of its circulating capital leading to profit of business, which profit may be either enjoyed or ploughed back for further profitable exploitation. The assessee's reliance solely on its power to lease its assets under the objects clause by itself does not make the rental income as business income, unless the intention to do business is clearly discernible from the facts and circumstances of the case. As pointed out by the Supreme Court in A. V Thomas Co. v. CIT [1963] 48 ITR 67, the nature of the transaction has to be determined not from the memorandum of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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