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TMI Blog1983 (6) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ss amounting to Rs. 24, 398 from the computation of income and it was held by the revenue that the source of the assessee's income was not business but other sources. 2. The assessment year involved in all these appeals is 1977-78 and for the sake of convenience, we first take up I.T.A. No 268 in which man issue is involved. The assessee is an HUF which had been running a woollen mills in the name and style of M/s Fateh Chand Wollen Mills. The said woollen mills having been closed down by the assessee during 1976-77 the said factory was leased out to one M/s Romex Industries as per lease deed dt 1st October, 1975. The said lease was only for a period of four years with an option to terminate the lease by either party after giving three c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty in a figure of Rs. 7,394 u/s 221(1) which was on total income thus computed by the ITO in a sum of Rs. 31,330. He levied a penalty of Rs. 1,000 u/s 221(1) As he had allowed the setting off Rs. 4,398 on account of unabsorbed depreciation pertaining to immediately three proceeding years the CIT u/s 263 directed him to disallow the same, as he had held the assessee's income from other sources. However the CIT observed that he is not opining that the assessee's income was from business or other sources as the matter was sub-judice but he also observed that "if finally it is decided that the income, is taxable as business income on which issue the assessee is in appeal the setoff of depreciation has also to be allowed but this will only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and therefore, it was leased out. It was of commercial asset alright and intention of closure of the factory was not at all there with the assessee. He also submitted that in case it is held that the assessee's is from business, all the expenses disallowed by the ITO deserve to be allowed as their admissibility had not been challenged on any other ground by the two lower authorities. The ld. senior departmental representative Mr. R.K. Bali, on the other hand, submitted that the factory was closed as is apparent from reading of the two lease deeds and he relied on the cases of New Savan Sugar and Gur Refining Co. Ltd. vs. CIT (1969) 74 ITR 7 (SC) and Sultan Brothers Private Limited vs. CIT (1964) 51 (ITR) 353 (SC) besides the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks supports the contention of the assessee on all fours. In that case, the assessee was a firm which was carrying on business of manufacture of machinery parts and also dealing in hand-tools. Before commencement of the accounting period relevant to the asst. yr. 1972-73, the assessee closed its manufacturing and trading activities and leased out the factory premises. The ITO allowed registration to the firm for the asst. yrs. 1972-73 and 1973-74. The CIT, acting u/s 263, cancelled the Registration on the ground that no business was carried on by the assessee during the relevant accounting years. This order was confirmed by the Tribunal. The partnership deed did not contain an express stipulation that the firm could carry on the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease deed, was to part with the entire machinery of the factory and the premises with the obvious purpose of earning rental income and not to treat the factory and the machinery as a commercial asset during the subsistence of the lease. The intention of the assessee was to go out of the business altogether so far as the factory and machinery was concerned. Making these observations their Lordships held that the income had to be taxed u/s 12 and not u/s 10. Similarly, the facts in the case of Sultan Brothers Private Ltd. are different. In the case, their Lordship of the Supreme Court observed: "Whether a particular letting is business has to be decided in the circumstances of each case. Each case has to be looked at from a businessman's poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the unabsorbed depreciation pertaining to three assessment years and the CIT u/s 263 while directing the disallowance or disallowance of set off of Rs. 24,398 himself observed as under in para 3 of his order: "3. I am not expressing an opinion whether the income is taxable under the head 'other sources' or under the head 'income from business' since the matter is sub-judice but as far as the order under consideration goes, setting off of the depreciation carried forward against the income which was held to be income taxable u/s 56 by the ITO was apparently erroneous insofar as it was prejudicial to the interest of the revenue. No doubt, if finally it is decided that the income is taxable as 'business income' on which issue the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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