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TMI Blog1951 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 1th June, 1945, included the sum of Rs. 20,005 realized as rent for five months, in the profits of the business of the respondent and held that excess profits tax was payable on this amount. This order was confirmed on appeal by the Appellate Assistant Commissioner and on further appeal by the Income-tax Tribunal. The Tribunal, however, on being asked referred the following question of law to the High Court for its opinion : --- " Whether in the circumstances of the case, the assessee's income of Rs. 20,005 is profits from business within the meaning of Section 2(5) of the Excess Profits Tax Act and therefore or otherwise liable to pay excess profits tax ? " The High Court answered the question in the negative. This is an appeal by special leave from this decision. It was contended on behalf of the Commissioner before the High Court that the dyeing plant was a commercial asset of the assessee's business for the purpose of earning profit and if this commercial asset yielded income to him in any particular manner, it was income from the assessee's business for the purpose of the Excess Profits Tax Act. It was said that it was immaterial whether a commercial asset yields income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset in the hands of the assessee and thereafter he gets what he can out of it by letting it out to be used by others, then the rent he receives is not income from any business that he carries on. " The learned Attorney-General pointed out that the nature of a commercial asset is not changed because a particular person is unable to use it. The inability of the assessee to make use of it in certain circumstances does not in any way affect the nature of the asset and cause an infirmity in the asset itself. It was contended that when the dyeing plant became idle for a short time during the chargeable accounting period it did not cease to be a commercial asset of the respondent for it had no other business ; that all the assets of the respondent including the dyeing plant were the assets of the business, that whatever income was derived by the use of these assets including the income that an asset fetched by its being let out was the business income of the assessee, and that there was no warrant in law for the proposition that a commercial asset which yields income must be used as an asset by the respondent himself before its income becomes chargeable to tax. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company itself, to earn profit by leasing it to somebody else. It is difficult to hold that the income thus earned by the commercial asset is not income from the business of the company that has been solely incorporated for the purpose of doing business and earning profits. There is no material whatever for taking the view that the assessee company was incorporated with any other object than of carrying on business or trade. Owning properties and letting them was not a purpose for which it was formed and that being so, the disputed income cannot be said to fall under any section of the Indian Income-tax other than Section 10. Cases of undertakings of this nature stand on an entirely different footing and are distinguishable from cases of individuals or companies acquiring lands or buildings and making income by letting them on hire. These latter cases may legitimately fall under the specific provisions of Section 9 or Section 12, though the High Courts in this country are by no means unanimous on this subject ; but for the purpose of this it is unnecessary to resolve that conflict. It may be observed that no general principle can be laid down which is applicable to all cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which concerns profits earned from a trade. Mr. Chatterjee also laid emphasis on the observations of Lord Greene, M. R., in Croft v. Sywell Aerodrome Ltd., wherein the learned Master of the Rolls observed as follows : --- "I cannot myself see that a person who leases the land to others, I or grants licences to others to come upon it, is doing anything more than exploiting his own rights of property, even if the tenant or licensee is, by the terms of the lease or licence, entitled himself to carry on a trade on the land." It was urged that what the assessee was doing in this case was exploiting his rights of property by letting the dyeing plant to other persons precisely in the same manner as the owner of land in the case cited above was exploiting his own rights to property by granting a licence to another to come on his land. The argument, in our opinion, though attractive, is follacious. The analogy between the case of land and of a dyeing plant for the purpose of taxing statutes is in appropriate. The distinction becomes apparent from the following passage which occurs in Atkinson, J.'s judgment in Iles's case : --- "Then it was suggested by counsel for the Crown that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference of pound 400 between the outgoing of pound 750 for the land retained and the incoming of pound 1,150 for the land disposed of was "income received from an investment," and, the business not being one within the special categories mentioned in the Finance Act, 1939, that pound 400 was not taxable. It was held that the word " investment " must be construed in the ordinary, popular sense of the word as used by business men and not as a term of art having a defined or technical meaning and that it was impossible to say that the Commissioners had erred in law in coming to the conclusion that the transaction resulted in an investment. Scott, L. J., in delivering his judgment laid emphasis on the point that after the business of the company had dwindled, it partitioned part of the land from the rest and sublet it by installing a heating apparatus for the sub-lessee. It was found that war conditions had reduced the company's business to very small proportions and they cut their loss by going out of business in respect of the major part of their land and put it out of their power for 14 years to resume business there. In this situation it was observed that in that case they w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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