Scindia Potteries vs Commissioner Of Income-Tax
2001 Latest Caselaw 875 Del

JUDGMENT

1. At the instance of the assessed, the following question has been referred for the opinion of this court by the Income-tax Appellate Tribunal, Delhi Bench (in short, "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (in short, "the Act") :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that rental income of Rs. 97,316 received by the assessed by the letting out of its godowns to Purolators (India) Ltd. was chargeable to tax in the hands of the assessed under the head 'Income from property' and not under the head 'Income from business' ?"

2. The dispute relates to the assessment year 1974-75.

3. The factual position in a nutshell is as follows :

The assessed derived rental income by letting out its godowns. It claimed that it should be treated as business income and not its income from house property. The Income-tax Officer, however, found that the assessed was running a business of manufacturing pottery till 1972-73 where after the business was stopped and the godowns were let out to another concern. As the

godowns had ceased to be the business assets on account of closure of manufacturing business, he treated the income to be chargeable as income from house property under Section 23 of the Act. It was noted that the assets ceased to be commercial assets and, therefore, income was to be treated as income from house property. The matter was carried in appeal before the Commissioner of Income-tax (Appeals). Taking note of the fact that the business activities had ceased during the accounting year relevant to the assessment year 1971-72, the Commissioner of Income-tax (Appeals) upheld the views of the Assessing Officer. The matter was carried in further appeal before the Tribunal. The stand of the assessed was that there was temporary suspension of business and there was no closure. The Tribunal with reference to material on record came to hold that there was cessation of business and the Department was right in its conclusion that income was taxable under the head "Income from house property. Accepting the prayer, a reference was made for the opinion of this court.

4. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed.

5. Learned counsel for the Revenue submitted that the factual position as noticed by the authority clearly shows that there was total abandonment of the business activities and, therefore, the view of the Tribunal is correct.

6. We find that there is no material on record, as observed by the Tribunal, about the intention to revive or resume business activities and the godowns were constructed for business of manufacturing the pottery. Manufacture of pottery activities were totally stopped during the previous year ending June 30, 1970, relevant to 1971-72 and there was no revival till the assessment year in question and, therefore, a factual finding was recorded by the Tribunal that there was no revival and there was no apparent intention to revive the business. The godowns had ceased to be commercial assets when they were let out to other concern on rent. That being the position, the Tribunal's conclusion are in order. Our answer is, therefore, in the affirmative, in favor of the Revenue and against the assessed.