TRIPURASUNDARI COTTON PRESS COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question that the Tribunal was asked to refer by this Court under S. 66(2) of the Indian IT Act, 1922 (No. XI of 1922) is:

(2.) THE answer to this question would depend upon the nature of the assets in relation to the activity of the assessee. The facts stated by the Tribunal are that the assessee, which was a public limited company, used to carry on the business of pressing cotton. It owned its own cotton press. The assets of the business consisted of buildings, godowns, machinery, etc. The assessment years for which this question has arisen are 1954 55, 1955 56, 1956 57 and 1957 58 for which the respective previous years are the calendar years ended 31st Dec., 1953, 31st Dec., 1954, 31st Dec., 1955, and 31st Dec., 1956. Prior to these years, due to adverse circumstances, the business of pressing cotton was stopped by the assessee by a resolution to this effect passed by the general body on 19th Nov., 1950. By a further resolution passed on 20th Aug., 1953, the general body of shareholders authorised the letting out of the building premises. By a third resolution passed by the board of directors on 12th May, 1954, it was decided to put up the machinery, i.e., the press, for sale. It is said that though the buildings were let out as decided by the general body, no sale of the machinery had by then taken place in any of the previous years concerned. Admittedly, no cotton pressing business was being carried on by the assessee in any of these years. The assessee contended that the income derived from the rent of the buildings was business income and sought to set up certain leases in the previous years. But the Department took the view that on the facts stated the income arising from the letting out of the buildings, etc., was income falling to be assessed under S. 9 of the Act. An appeal to the AAC and to the Tribunal were all rejected.

(3.) MR . Kuppuswami has contended on the rationale of the decision in CEPT vs. Shri Lakshmi Silk Mills Ltd. (1951) 20 ITR 451 (SC) that the asset in this case is a commercial asset, inasmuch as the machinery, etc., has not been sold and, therefore, the IT authorities were wrong in classifying the income derived for the years in question under the head "Income from property". As we have said earlier, the determination of this question depends upon the facts and circumstances of each case and no two cases are alike.