1999 PLP 1788 (PTD)

Business

Other sources

Business income or income from other sources

Lease

Income from lease was assessable as business income

Indian Income Tax Act, 1961, Ss.28 &

56. Held, (i) that the lease money received by the assessee during the assessment year 1974-75 was assessable under section 28 of the Income Tax Act, 1961, and not under section 56; C. I.. T v Northern India Iron and Steel Co. Ltd. (1995) 211 I T R 370 (Delhi) fol.. (ii) that the assessee was not entitled to development rebate; CIT v. Northern India Iron and Steel Co. Ltd. (1995) 211 I T R 370 (Delhi) fol. (iii) that under subsection (4) of section 80-J, one of the conditions which the assessee is required to fulfil for claiming rebate is that it manufactures or produces articles. In view of the fact that the assessee had no control over the machinery, the question of grant of rebate under section 80-J did not arise because it could not be said that the assessee manufactured or produced articles. R. D. Jolly for the Commissioner. In respect of the assessment year 1974-75, at the instance of the Revenue, the following two questions have been referred for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the lease money received by the assessee during the assessment year 1974-75 was assessable under section 28 and not under section 56 of the Income Tax Act, 1961? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee-company was entitled to development rebate and deduction under section 80-J of the Income Tax Act, 1961?" In so far as question No. l is concerned, relying upon the order of the Tribunal in the case of the assessee for the assessee for the assessment years 1971-72 and 1972-73, the Tribunal held that the income of the assessee from lease rent should be taxed under section 28 of the Income Tax Act. 1961, under the head "Business". Consequent upon this finding, the Tribunal further held that the Appellate Assistant Commissioner was justified in giving a direction to allow development rebate and deduction under section 80-J of the Act. The case of the assessee pertaining to the assessment year 1971-72 is the subject-matter of a decision of this Court in C.

1. T. v. Northern India Iron and Steel Co. Ltd. (1995) 211 I T R 370 one of us (D. K. Jain J.), was a member of the Bench deciding the said case. Following that decision, question No.l is answered in the affirmative in favour of the assessee arid against the Revenue. Question No.2 deals with entitlement of the assessee to be granted development rebate and also deduction under section 80-J of the Act. In so far as the claim of development rebate is concerned, it is concluded against the assessee in the aforesaid case pertaining to the year 1971-72. Regarding the claim for deduction under section 80-J it has been found in the aforesaid cited decision that since the machinery was let out the lessee had control over the use of the machinery and the assessee had no control over its user. Under subsection (4) of section 80-J, one of the conditions which the assessee is required to fulfil for claiming rebate is. that it manufactures or produces articles. In view of the aforesaid finding that the assessee had no control over the machinery, the question of grant of rebate under section 80-J does not arise because it cannot be said that the assessee manufactures or produces articles. In this view, question No.2 is answered in the negative, in favour of the Revenue and against the assessee. M.B.A./1923/FC