Decided on December 05,2003



Aloke Chakrabarti, J. - (1.)THIS appeal was filed under s. 260A of the IT Act, 1961, against the judgment and order of the Tribunal in respect of three assessment years, namely, 1978-79, 1979-80 and 1981-82.
(2.)THE facts relevant for the present appeal are that the petitioner public limited company is engaged in business of manufacture and sale of sugar in the sugar mills of the petitioner situated at Motihari. THE petitioner operated the said factory which was mortgaged to Bihar State Financial Corporation and to Industrial Financial Corporation of India. In view of the losses suffered by the petitioner-company, the petitioner leased out the said factory to the lessee M/s Gobind Sugar Mills Ltd., by a lease agreement dt. 1st May, 1969, for a period of five years under the terms and conditions recorded in the lease deed. THE rent payable under the said lease were to go to the financial corporations to liquidate their respective dues from the petitioner. On expiry of the said period another lease was executed on 19th April, 1974, followed by a third lease deed dt. 30th April, 1979. Subsequent lease deeds again were executed for further periods which do not govern the subject periods.
In respect of each assessment year the lease rent received by the petitioner was shown by it under the head 'profits and gains of business'. The IT authorities accepted the said income under the said head from the asst. yr. 1969-70 till 1977-78. But for the asst. yr. 1978-79 the said contention of the assessee has been rejected and the said lease rent income has been treated by the IT authorities as income from other sources. Similar finding was recorded for the asst. yrs. 1979-80 and 1981-82.

In respect of asst. yr. 1980-81 the Tribunal accepted the contention of the assessee and decided in its favour. The prayer for transmitting statement of facts with reference to this Court, was rejected by the Tribunal. The application before the High Court for direction upon the Tribunal for making a reference on the said point, was also not accepted though rule was issued in respect of other questions. With regard to asst. yr. 1988-89 also the Tribunal held in favour of the assessee in regard to said question and the appeal filed by the Revenue was dismissed by the another Division Bench of this Court. Further, in respect of the asst. yr. 1990-91 after the Tribunal held in favour of the assessee on the said question, the appeal filed by the Revenue before this Court, is pending.

(3.)HEARD Mr. R.N. Bajoria assisted by Mr. J.P. Khaitan, learned counsel for the appellant, and Mr. D.K. Som, learned counsel for the respondent Revenue.
Contention of the appellant is that the appellant was all along using the factory including all its assets as commercial assets and the lease rent income earned therefrom has to be treated as business income as the intention of the assessee all through is not to part with the factory and its assets finally and those were let out temporarily to meet the financial crisis and was let out for being run as sugar factory. For showing the intention of the present assessee reference was made to various lease deeds executed from time to time and to the Directors' report of all relevant years showing the intention of the persons concerned at the relevant point of time.


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