SENGUPTA, J. - (1.) IN this application under s. 261 of the IT Act, 1961 ('the Act') the assessee has sought for a certificate of fitness for appeal to the Supreme Court contending that the following substantial questions of law of general importance arise from the judgment and order passed by us in IT Ref. No.17 of 1991 on 6th Feb.,1992: "Whether, in case of; a leave and licence agreement for a term containing an option for its renewal for a further term by grant of a fresh licence, a convenient conferring an option on the licensee to purchase the licensed premises on the expiry of such further term created only a remote contingent right or a present vested right of purchase in the licensee during the subsistence of the initial leave and licence agreement and before its renewal by grant of a fresh licence? Whether, such a convenant for purchase option is indicative of any intention of the licensor to go out of its business relating to the licensed premises when the other convenants of the agreement indicate an intention to remain in the business? Whether, the licence fee received under such a leave and licence agreement is assessable as business income or income from other sources?" Shortly stated, the facts of the case are that the assessee being in financial stringency for successive losses allowed another party to utilise its production unit including plant and machinery and the factory premises on leave and licence under an agreement for a period of seven years with an option for renewal for a further period of three years and after the expiry of the said 10-years licence the said licensee had the vested right to opt for purchase of the undertaking of the assessee at a price of Rs.65 lakhs payable in two instalments, the first one being of Rs.30 lakhs on or before 31st Jan., 1987 and the second one for the balance Rs.35 lakhs on or before 25th Jan., 1988,
(2.) THE licence was termined by the assessee as the licensor in two contingencies, viz., (1) breach of any of the terms of the licence agreement or making default in payment of any two quarterly installment of licence fee, and (2) in the event of winding up of the licensee. In view of the licensee's vested right to purchase the entire undertaking at a pre-determined price in terms of cl. 18 of the agreement an inference has been drawn by the Court that the arrangement was entered into by the assessee with no intention to resume the business, applying the principles laid down by .the Supreme Court in CEPT vs. Shri Lakshmi Silk Mills Ltd. (1951) 20 ITR 451 and New Savan Sugar & Gur Refining Co. Ltd. vs. CIT (1969) 74 ITR 7 The decision arrived at by the Court is that assessee's undertaking ceased to be commercial asset and the licence fee was received by the assessee not in its company as a trader but as the owner simpliciter of the asset as the assessee intended to go out of the business. Therefore, the licence fee was assessable under the head 'income from other sources' and not 'Profits or gains of business'.
(3.) THE case in our view present no difficulty or controversy to be resolved by the Supreme Court, the decision being based on the principles laid down by the Supreme Court for determining the issues arising from such letting, leasing or licensing of the business assets. What is decisive in such matter is the intention-whether the commercial asset was intended to be exploited by the assessee by such letting out for a temporary period. it is pre-dominantly a matter of intention to be gathered from attendant circumstances. This principle is also by now well settled in CIT vs. Vikram Cotton Mills Ltd. (1988) 67 CTR (SC) 259 : (1988) 169 ITR 597 (SC). The now fact that the assessee had conferred on the licensee in the case the unqualified power of purchasing the entire undertaking after 10 years at a pre-determined price gives transparency to the assessee's intention of not resuming the business at the time it entered into the agreement. There cannot arise any substantial question of law of general important to be settled by the Supreme Court as the law in this regard already stands settled and the matter raises no question which can be said to be as open question requiring an answer by the Supreme Court.;