Income Tax Appellate Tribunal - Delhi
Indure Malleable And Alloy Castings ... vs Income-Tax Officer on 6 September, 1989
Equivalent citations: [1989]31ITD466(DELHI)
ORDER
F.C. Rustagi, Judicial Member
1. This is an appeal, preferred by the assessee, pertaining to assessment year 1983-84, against the order of CIT (Appeals)-I, New Delhi. The three grounds raised are that, income from hiring of commercial assets is 'business income' and not income from 'other sources', as held by the two lower authorities and assessee's claim in respect of set off of unabsorbed losses of earlier years and unabsorbed depreciation brought forward from earlier years is admissible to be set off.
2. Briefly to state the facts the assessee is a private limited company. It was incorporated in December 1971 for carrying on the business of manufacture and sale of castings. The said business was carried on till 31-3-1980. However, w.e.f. 1-4-1980 the entire business assets were leased out on rent including the cars owned by the appellant company to a sister concern styled as M/s Indure (P.) Ltd. The claim of the assessee in respect of hire charges from, the commercial assets was that 'income from business' and against the same the assessee had also claimed set off of losses pertaining to earlier years and also unabsorbed depreciation coming from earlier years. The ITO not only held that income from hiring out of commercial assets to M/s Indure (P.) Ltd. as income from 'other sources', but rejected assessee's claim regarding set off of unabsorbed losses and depreciation coming from earlier years. The CIT (Appeals) confirmed the finding of the ITO in respect of all the three years.
3. Aggrieved by the said order of CIT (Appeals) the assessee has come before the Tribunal, raising three substantial grounds, disputing the finding of CIT (Appeals), who held the income from hiring charges as income from 'other sources' and also who did not hold the admissibility regarding set off of unabsorbed losses and depreciation. The learned counsel for the assessee while disputing the main finding given by the CIT (Appeals) regarding income from hiring charges as 'income from other sources', submitted that in case the said is held as 'income from business', than assessee's claim regarding set off of unabsorbed losses and unabsorbed depreciation from earlier years would be admissible in consequence. He submitted that right from the inception the assessee had been running the said concern till 31-3-1980, but as ill luck could have it, Shri D.R. Mehta, who was the managing director of the assessee company and was an expert of repute in metallurgy, resigned in 1980-81 due to cancer. He submitted that the vacuum created by Shri Mehta's departure could not be easily filled and despite search for a specialist, the assessee company could not find one. As the monthly rent of Rs. 2850. in addition to the expenditure on staff, who was looking after the plant and machinery and factory building, were the expenses, faced by the assessee company, the assessee company elected to hire out the said plant to M/s Indure (P.) Ltd. and M/s Desein (New Delhi) Pvt. Ltd., both respectively incorporated on 22-4-1970 and 15-12-1970. It was submitted by him that M/s Indure Pvt. Ltd. had been engaged in the manufacture and sale of ash handling plants for Thermal Power houses, whereas M/s Desein (New Delhi) Pvt. Ltd., owned by Shri N.P. Gupta and his uncle Shri Mohan Gupta with other members of their family had been engaged in the consultancy business for power houses. He submitted that it was only for a temporary period till the assessee company was in a position to resume its run, the commercial assets were rented out. He drew our attention to explanation submitted before the Commissioner of Income-tax under 263 proceedings for assessment year 1982-83, which finds place on assessee's compilation on pages 5 to 10. He drew our attention to page 12 a letter written by the assessee company on 15-3-1980 to M/s Indure Pvt. Ltd. regarding leasing out of the said commercial assets and also pointed out that the said letter was not only offer for lease, but it was duly accepted by Shri N.P. Gupta on behalf of M/s Indure Pvt. Ltd. He submitted that there was no lease-deed as such and whatever the terms of the lease could be seen from the said letter. He submitted that in the said letter it is mentioned that it was due to ill health of Shri D.R. Mehta that it was proposed to shift the factory from Faridabad at near places either at Sahibabad or in Delhi. It was also indicated therein, as pointed out by the learned counsel for the assessee that in the meantime till alternative arrangements were made to employ a reliable and competent production in charge, the assessee had agreed to lease the captioned assets to the lessee. From the said Setter he projected that no sooner the assessee was in a position to resume its manufacturing operations, the said lease will be terminated. He drew our attention towards the annexure in which each of the nine assets including motor vehicle were leased out for different monthly charges. He relied on a catena of decisions viz. CEPT v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC), CIT v. National Mills Co. Ltd. (.19581 34 ITR 155 (Bom.), [1962] 46 ITR 181 (sic), CIT v. Varna Silk Mills (P.) Lid. [1978] 112 ITR 701 (Guj.), CIT v. Katihar Jute Mills (P.) Lid. [1.979] 116 ITR 781 (Cal.),Addl. CIT v. Rajindra Flour & Allied Industries (P.) Ltd. [1981] 123 ITR 402 (Delhi) and CIT v. Premchand Jute Mills Ltd. [1987)164 ITR 288 (Cal.) from which he specifically read from page 300 of the report. He submitted that all these cases support the contention of the assessee and read certain relevant paras from some of these cases, He submitted that cases relied upon by the CIT (Appeals) and the Income-tax Officer in their orders are such on which Revenue's reliance is misplaced, the learned D.R. on the other hand besides relying on the orders of the two lower authorities, relied on the decisions in New Savan Sugar & Our Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC), CIT v. Super Fine Cables (P.) Ltd. [1985] 1.54 ITR 532 (Delhi) and Rajindrai Flour & Allied Industries (P.) Ltd.'s case (supra) in addition to the reliance placed by the Revenue on cases dealt with by the two lower authorities.
4. In the rejoinder the learned counsel for the assessee pointed out that Rajindra Flour & Allied Industries (P.) Ltd.'s case (supra) is a case which directly goes in favour of the assessee and New Savan Sugar & Gur Refining Co. Ltd. $ case (supra) stands considered in the said case. Regarding two disputes pertaining to set off of unabsorbed losses and unabsorbed depreciation pertaining to earlier years both of them agreed that in case the income from hire charges is held to be the income that of business, the same shall be admitted. The learned counsel for the assessee also submitted in the alternative that even if hire charges is considered to be income from 'other sources', he would be failing in his duty if he does not point out that one of the objects in the memorandum was even to hire out the commercial assets and as such the same becomes income from 'business' and even then assessee's claim regarding set off of losses pertaining to earlier years and unabsorbed depreciation has got to be allowed.
5. After taking into consideration the rival submissions and carefully perusing the record available on appeal file accompanied by paper book, we are of the view that income from hire charges of the commercial assets held by the assessee company should have been treated as income from 'business' and assessee's claim in respect of determined losses pertaining to earlier years and unabsorbed depreciation carried forward from earlier years should be set off. There is no controversy about the fact that the assessee company was incorporated in December 1971. It ran its business of manufacture and sale of casting till 31-3-1980 and it was as per its letter dated 15-3-1980 that the assessee company offered to M/s Indure Pvt. Ltd. of Sahibabad, the commercial assets held by it, comprising of rotary furnaces, sand mixers, air compressor, platform balance, diesel generating set, furniture & fixture, moulding boxes, laboratory equipments and motor vehicle on the monthly rent, noted against each of these assets on page 14 of assessee's compilation, which is annexure with the letter written by the assessee company on 15-3-1980 and which on the margin stands accepted by and on behalf of M/s Indure Pvt. Ltd. since there is no specific lease deed executed by the assessee company with the lessee, it becomes very important to give the terms of lease, which are indicated in the said letter and its preamble. Therefore, we reproduce the same as under: -
To: Dated:15th March,1980
M/s Indure Private Limited
45/1, New Industrial Area
Site No. 4,
Sahibabad (U.P.)
Subject: Proposal for the short term lease of the plant and machinery,
laboratory equipment, motor vehicles, furniture and fixtures etc. of
M/s INDMAC.
Dear Sirs,
As you are aware our manufacturing operations of castings are suspended because of ill health of Mr.D.R. Mehta and we propose to shift our factory from Faridabad to a place near your factory either in Sahibabad or in Delhi. In the meantime till alternate arrangements are made and we employ a reliable and competent production incharge we have agreed to lease to-you the captioned assets on the terms and conditions set out hereinbelow so that your production is not disrupted.
(1) That you are willing to pay the rents at the rates shown against each business asset in the annexure w.e.f. 1st April, 1980.
(2) That the hiring out of the aforesaid of our business assets will be initially for a period of five years commencing from 1st April, 1980 and its further renewal will be determined after taking into account our own circumstances at rates and terms which would be acceptable to us.
(3) That we will continue to undertake the annual insurance of the motor vehicles whereas other day to day running and maintenance expenses of the plant and machinery etc. will be at your cost.
(4) That you will keep the plant and machinery, motor vehicles, laboratory equipments, furniture and fixtures in a proper condition so that we are in a position to resume our. manufacturing operations without incurring any substantial expenditure.
(5) That you will allow us to inspect our assets in order to ensure that the same are being maintained properly.
(6) That this arrangement can be terminated with three months notice from either side.
(7) That this arrangement is purely temporary in view of our present difficulties and it would be open to us to have it cancelled even before the expiry of the initial term of five years.
(8) That you will not undertake any major alterations and additions to our business assets without our prior approval.
In case the above terms and conditions are acceptable to you, the original copy of this letter may kindly be signed in token of your acceptance and sent to us, Thanking you, Yours faithfully THE 1NDURE MALLEABLE & ALLOY CASTINGS PVT. LTD.
Sd/-
Accepted. SECRETARY
FOR THE INDURE PRIVATE LIMHBD
Sd/-
Director.
6. With this letter on one hand we also find that details of assessee's profit & loss, showing sales and hire charges etc. are projected by the assessee in following chart: -
THE INDURE MALLEABLE AND ALLOY CASTINGS PRIVATE LTD.
Chart showing details of Sales, Hire Charges, Income, other Income and Net Profit/Loss over different year
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Year Ending Sales Hire Other Total Amount in Rupees on Charges Charges Net Profit/Loss
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31-12-1978 23,66,917 - 1,37,314 25,04,231 (-) 82,316 31-12-1979 15,34,672 - 2,550 15,37,222 (-) 56,897 31-12-1980 2,18,086 66,100 - 2,84,186 (-) 58,132 31-12-1981 - 99,200 - 99,200 40,134 31-12-1982 - 1,12,800 - 1,12,800 65,831 31-12-1983 - 88,800 798 89,598 50,346 31-12-1984 69,142 67,200 544 1,36,886 37,287 31-12-1985 66,860 67,200 554 1,36,614 37,674
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7. From the above letter and chart it is apparent that it was only for a period of three years i.e. 1982-83,1983-84 and 1984-85 that the assessee had no sales of its own, though for assessment year 1984-85 there were other incomes, howsoever small it was, as it was that of Rs. 798. From the perusal of above extracted letter and statement it is clear that it was only for a limited period that the assets were hired out, as the assessee wanted to tide over that period which unfortunately fell on its business due to serious sickness and resignation of Shri D.R. Melita. One of the main contentions relied upon by the learned lower authorities and projected by the learned D.R. was that the said factory was transferred from Faridabad to Sahibabad. According to us nothing turns on that because from the said letter it is clear that the assessee company itself was proposing to shift its factory from Faridabad to a place near the factory of the lessee either at Sahibabad or in Delhi. The Character of the commercial assets never changed. This is also found as a fact that one of the objects of the assessee company in the memorandum was to rent out the commercial assets. In other words it was the approved business which it was authorised to carry on instead of business of manufacturing and selling castings. Once it is held to be 'business income', assessee succeeds in its both the contentions pertaining to set off of determined losses and unabsorbed depreciation from earlier years. We shall be failing in our duty in case we do not deal with the case law having been cited from both the sides, though on basis of facts alone the assessee succeeds, on the first main contention and assessee's success for the other second two contentions is consequential. It will not be out of place to mention that for subsequent years assessee's income has been treated as that of 'business'.
8. Corning to the decision in the case of Shri Lakshmi Silk Mills Ltd. (supra), the facts were that assessee company was a manufacturer of silk cloth and as a part of its business it installed a plant for dyeing silk yearn. During the calendar year 1943 the assessee could not make use of the plant as there was difficulty in obtaining silk yarn and the plant as such remained idle. The said plant was rented out on a ' monthly rent in August 1943, though under the Excess Profits Tax Act, the dispute before their Lordships of Supreme Court was, whether it was income from 'other sources' or 'Business'. Their Lordships held in the said case as under: -
that it was a part of the normal activities of the assessee's business to earn money by making use of its machinery by either employing it in its own manufacturing concern or temporarily letting it to others for making profit for that business when for the time being it could not itself run it, and that the dyeing plant had not ceased to be a commercial asset of the assessee and the sum representing the rent for five months received from the lessee by the assessee was therefore income from business and was chargeable to excess profit tax.
8.1 The facts of the instant case are also similar as it was due to difficulty in running the factory due to sickness and resignation of the Managing Director and it was in order to reduce the loss as a consequence of rent and supervision of the assets that the commercial assets were leased out.
9. Their Lordships of Bombay High Court in case of National Mills Co. Ltd. (supra) following earlier decision that of Supreme Court in Shri Lakshmi Silk Mills Ltd. 's case (supra) held the income from letting out of the plant and machinery as income from "business". Very briefly to state the facts, M/s National Mills Co. Ltd. which was manufacturing textiles, got into financial difficulties and ceased manufacturing textiles in April 1949. So much so the said company was ordered to be wound up by the court in February 1950. The liquidator of the said company let out the plant and machinery at a monthly rent for a period of three years, option having been left to the lessee for renewal of the lease. In that case even the lessee had option to purchase the plant at a price fixed on the expiration of the lease. In that case the Income-tax Appellate Tribunal held that income arrived at by the company from letting out of the plant and machinery was income from business and could be set off against its loss of preceding years brought forward. Their Lordships of Bombay High Court after referring a catena of judgments held as under: -
on the facts, that there was material to justify the finding of the Appellate Tribunal that the income derived from the lease of the Plant and Machinery was income from business and that the income so derived could be set off against losses of the company from the business of the manufacture of textiles brought forward from the preceding year under Section 24(2) of the Income-tax Act.
The fact that a company which was carrying on business has gone into liquidation does not prevent the liquidators from carrying on the business.
In order that the income of the assessee should be business income, it is not necessary that the income should be produced by the assessee, utilising the business assets itself. So long as those assets are used as business assets, it is irrelevant whether the business assets are exploited and used by the assessee itself or someone else. Where instead of carrying on the business itself, the assessee permits someone else to use the assets and carry on the identical business, then the activity of the assessee is a business activity.
9.1 The present case is on a better footing, as National Mills Co. Ltd. 's case (supra) was not only in liquidation, but there was a stipulation even to the effect that the lessee could purchase the assets.
10. Again their Lordships of Bombay High Court in the case of C.P. Pictures Ltd. v. CIT [1962] 46ITR 1181, had occasion to deal with identical issue and following earlier two decisions that of Supreme Court in case of Shri Lakshmi Silk Mills Ltd. (supra) and that of Bombay High Court in National Mills Co. Ltd.'s case (supra) dealt with above, held that income from leasing oat of theatre and its equipment was income from, "business" and had to be assessed Under Section 10. The facts of that case were that assessee was carrying the business of exhibiting motion pictures in its own cinema theatre. In 1953, it leased out the theatre for the purpose of exhibiting motion pictures to a stranger for 5 years with an option for renewal up to 8 years on a monthly rental of Rs. 2,000. The premises included the out-houses, restaurants, furniture, fixtures, machinery and the whole equipment of the cinema house. The Tribunal, however, held the income as "income from other sources" in the said case. But when the matter came before the Bombay High Court, their Lordships observed that if an assessee who was using a commercial asset himself for his business, for the purpose of earning profit, lets out the assets to a stranger for being used in the same business for which it was used by the assessee, the mere circumstance that the asset had been let out without being used by the assessee himself is not sufficient to come to a conclusion that the assessee has ceased to do the business which he was carrying on till then. Their Lordships, however, observed that issue whether it is income from "business" or from "other sources" would depend upon the facts of each case.
10.1 Facts found in the present case are that assessee was using the commercial assets for its business. For the temporary period of three years or so, when it could not use the same, the same were let out to an allied concern, who used the same for the same purpose and as per terms and conditions of the offer and acceptance in form of a letter. The lessee further had the proposal of transferring the assessee's business from Faridabad to Sahibabad. On the top of this the assessee was authorised to do the business that of letting out as per stipulations in the memorandum.
11. In case of Vania Silk Mills (P.) Ltd. (supra), their Lordships of Gujarat High Court again applied Shri Lakshmi Silk Mills Ltd. 's case (supra) and Natioiu ' Mills Co. Ltd.'s case (supra), and after considering Supreme Court decision in the case of New Savan Sugar & Gur Refining Co. Ltd. (supra) on which reliance was placed by the Revenue. In that case the assessee, which was a private limited company had imported two machines for manufacture of art silk. But due to non-availability of air-conditioning facilities the same could not be installed. The assessee in that case gave the said machines on lease to sister concern, which carried on identical business for a period of five years. Since there was a stipulation that assessee would always have priority charge on the machines, the Tribunal in that case held that it was income from 'business'. Before their Lordships it was contended on behalf of the Revenue that the machines in question never become commercial assets as the same were leased out no sooner they were imported. In this case as per the objects clause the assessee was also authorised to lease its property. Their Lordships confirming the decision of the Tribunal accepted assessee's contention in the following words: -
that the assessee was a manufacturing concern and there was no dispute that the two machines could be used by the assessee in its own manufacture, but they were actually used by its sister concern in identical business. Merely because for want of air-conditioning facilities the assessee could not instal the machines at its premises it could not be said that the machines had not become part of the commercial assets of the assessee. Under the terms of the lease deed the assessee had priority rights over the machines. It could also terminate the lease before it got renewed for a further term. In this context the objects clause could not be construed to mean that the machines were not intended to be used by the assessee. The machines were commercial assets and had been leased out for purposes of better exploitation. The income earned under the lease agreement was, therefore, assessable as income from business.
11.1 The present case again is on a better footing because commercial assets were utilised prior and after to leasing out and the assessee also had provision for leasing out all the commercial assets in its memorandum.
12. Even their Lordships of Calcutta High Court in the case of CIT v. Prem Chand 'Jute Mills Ltd. [1978J114ITR 769 had occasion to deal with identical dispute and in the said case all the earlier decisions, dealt with by us above, came to be referred, including certain decisions relied upon by the Revenue. In that case the assessee company had been carrying the business of manufacture of jute goods and it incurred heavy losses due to various factors including quarrels amongst the Directors. It was found difficult to work the mills and attempts at settlement were made first through the mediation of Central Government Investigation .and later through the Jute Controller. The company leased out the Jute Mill for a period of five years with an option to renew it for another five years. The Tribunal not only held in that case that income from the lease was 'business' income, but also held that assessee was entitled to set off its unabsorbed losses and unabsorbed depreciation against his income. Their Lordships in this case enunciated the following principles: -
1. In order to be a business income there must be evidence of exploitation of a commercial asset.
2. Exploitation of commercial asset does not necessarily mean exploitation by the assessee himself at all material times. The assessee may temporarily cause it to be exploited by another person against payment of consideration and for this purpose may execute a lease for a fixed period even with option to renew.
3. But, in order that the income derived from the lease should be taxable it must be shown that the lessor's intention was that during the period of the lease the asset leased out must remain and be treated as a commercial asset and be exploited as such.
4. This intention of the lessor has to be ascertained from the cumulative effect of all the terms of the lease and other material circumstances.
After enunciating the said principles, Their Lordships held as under: -
Where income is derived by the exploitation of the asset and there is only a difference in the manner of exploitation, that is to say, instead of user of the asset by the assessee himself there is a leasing out of the asset, the income derived must be considered to be of the same nature, viz. business income. Unabsorbed depreciation and losses incurred when the asset was exploited by the assessee himself can be carried forward and set off against the income derived from leasing out of the commercial asset.
13. Calcutta High Court in the case of Katihar Jute Mills (P.) Ltd. (supra), again had occasion to deal with identical dispute and after referring some of the decisions given above and also the decisions relied upon by the Revenue, came to the conclusion that income from renting out the commercial assets was income from 'business'. In this case the assessee company was very badly off. The directors even decided to close it down. There was even an industrial dispute as the company had issued a notice of closure. The assessee company got loan and wanted to reopen it, but it was found impossible. Then it was decided to lease out the mill. It was leased out for five years. Before the expiry of the lease, the lessee surrendered the lease. It was further leased out to another lessee for a term of two years. The income from lease money was considered as income from 'other sources' by the ITO. At the Tribunal's stage it was held that it was income from 'business'. In this case even memorandum of association did not contain the express power to carry on the business of letting out. The company was authorised to carry on business. Their Lordships held that the authority was wide enough to include the business of letting out and confirmed the finding of the Tribunal that it was income from 'business'. Their Lordships went on to observe that commercial asset was not put in cold-storage. The desire of the company to exploit the commercial asset, if possible by itself, and, if not possible, with the aid of someone else by leasing it out.
14. Their Lordships of Delhi High Court in the case of Rajinder Flour & Allied Industries (P.) Ltd. (supra) had occasion to deal with identical issue. In this case their Lordships of Delhi High Court, under which we are sitting, after dealing with a large number of decisions on the issue adjudicated the issue in favour of the assessee, that income from leasing out was "business" income. This is the case on which reliance was placed by the learned D.R. on certain observations. While applying the case law not only the entire facts in the background should be read, but the entire decision should be read. As pick and choose was adopted both the Revenue and the assessee said that they are supported by this decision. As a matter of fact this decision supports the contention that of the assessee. In this case the mill was ready for working by August 31,1964, but a! the crucial time Shri Rajindra, the moving spirit behind the venture, died and his widow had to take over as managing director in somewhat difficult circumstances. The company could not get an industrial licence and had to let out the mill on lease for a period of five years to a party who secured the licence within a matter of months. On expiry of the lease the assessee got back the mill and started working it. The Tribunal held that it was a temporary measure and it was income from 'business'. Their Lordships finally held that income from lease of the plant and machinery was to be continued under the head "profit & gains of business". Their Lordships on page 408 of the report observed that "lease agreement was ordinary lease agreement which did not give to the lessee any enduring or permanent rights on the assets". In the present case it was only offer and acceptance in form of a letter. At page 412 of the report while dealing with Calcutta High Court decision in case of CIT v. Ajmera Industries (P.) Ltd. [1976] 103 ITR 245, their Lordships observed, "It appears that this case helps both the assessee as well as the revenue". It was from this observation that learned D.R. wanted to derive strength from this decision. In this case, the case of Seth Banarsi Das Gupta v. CIT [1977 ]106 ITR 599 (All.), which is relied upon by the Revenue and also New Savan Sugar & Gur Refining Co. Ltd.'s case (supra) came to be dealt with. Their Lordships observed in the said case on page 419 of the report, "When two views are possible, and this is a case which stands on the borderline, the court should accept the Tribunal's view", which was that income from leasing out was "business income". Specifically in this case their Lordships while answering the question in favour of the assessee made a mention that as per memorandum, the object was, "To buy, sell, manufacture, repair, alter, improve exchange, let out on hire, import, export, and deal in all factories, works, plant, machinery, tools, utensils, appliances..."and after extracting the said object, their Lordships went on to hold as under : -
One of the objects of the company was to hire out factories. No doubt, if there is a person whose business is to hire out machines or plants etc. he would be said to be doing business although in normal circumstances this might be considered a non-business purpose. Similarly, on the facts of the present case, the objects clause permitted the assessee to hire out its factory as a part its business activities. Therefore, the leasing of the factory would be a part of the business by the assessee. So, in addition to all the previous reasons given, it would appear that the leasing of the factory was a business activity.
14.1 In the present case as well there is object and not only it is a case of border-line but an issue covered by the Jurisdictional High Court.
15. We are also fortified in our action by Calcutta High Court decision in the case of Premchand Jute Mills Ltd. (supra), in which the decisions in the case of CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC) and also New Savon Sugar & Gur Refining Co. Ltd. 's case (supra) came to be referred. It was also a case of Premchand Jute Mills Ltd. (supra) which was leased out for five years with further option of renewal for five years. After lease term the assessee did not resume business, but agreed to sell. As shareholders did not approve, the proposal for sale was dropped. Thereafter the mill was leased out for 30 years with renewal option of another 20 years. The income from the first lease was considered to be income from 'business , but second was considered to be income from "other sources", as therein the intention to part with the entire assets for the purpose of realising only rental income was there. The present case is more akin rather on its better footing than the first lease.
16. The reliance of the learned D.R. on New Savan Sugar & Cur Refining Co. Ltd. 's case (supra) is misplaced as it has been dealt in number of decisions, cited above, which go to support the contention of the assessee due to distinction in facts. Therein the intention of the appellant was to part with the entire machinery of the factory and premises with the obvious purpose of earning rental income and not to treat factory and machinery as a commercial asset during subsistence of the lease. Their Lordships observed that the intention of the appellant was to go out of business all together, which is not so in the present case.
17. Similarly in the case of Super Fine Cables (P.) Ltd. (supra), their Lordships observed that: -
What has to be seen is whether the asset is being exploited commercially by the letting out or whether it is being let cut for the purpose of enjoying the rent. The distinction between the two is a narrow one and has to depend on certain facts peculiar to each case.
17.1 The facts in the present case are different.
18. In the light of facts stated in earlier part of this order and dealing with judge made law in later part we are convinced that the income in the present case from leasing out commercial assets is to be treated as "income from business" and the assessee is entitled to set off of unabsorbed losses and unabsorbed depreciation coming from earlier years. CIT (Appeals)'s action is, therefore, reversed and assessee's appeal stands allowed.