| Case ID |
144ada29-35c6-4ead-b2a9-f45874e33b2c |
| Body |
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| Case Number |
IT REFERENCE No. 185 OF 1967 |
| Decision Date |
May 28, 1974 |
| Hearing Date |
May 27, 1974 |
| Decision |
The tribunal found that the rental income derived from factory sheds and electrical installations was assessable under section 56(2)(iii) of the Income-tax Act, 1961. The court ruled that since the assessee had not commenced its manufacturing business due to lack of machinery, the income could not be classified as business income. However, rental income from non-factory buildings was deemed business income as the assessee utilized these commercial assets primarily for its own business purposes, letting out surplus portions through other agencies. This decision emphasized the importance of how commercial assets are exploited, whether directly or through third parties, in determining the nature of income derived from them. |
| Summary |
In the significant case of IT REFERENCE No. 185 OF 1967, the Calcutta High Court addressed the taxation of rental income derived by Ajmera Industries (P.) Ltd. under the Income-tax Act, 1961. The court examined whether the income from renting out factory sheds and electrical installations constituted business income or income from other sources. The tribunal concluded that since the manufacturing activities had not commenced due to machinery shortages, the rental income from factory assets fell under section 56(2)(iii) rather than section 28. Conversely, income from non-factory buildings, let out after using them for business purposes, was classified as business income. This case illustrates the nuances of income classification in tax law, emphasizing the distinction between direct exploitation of assets and income derived through third-party arrangements. The ruling is pivotal for businesses navigating similar income classification dilemmas, highlighting the importance of operational intent in tax assessments. |
| Court |
Calcutta High Court
|
| Entities Involved |
Ajmera Industries (P.) Ltd.
|
| Judges |
A.N. Sen,
R.N. Pyne
|
| Lawyers |
B.L. Pal,
Ajit Sengupta,
Nirmal Mukherjee,
Prabir Mukherjee
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Ajmera Industries (P.) Ltd.
|
| Citations |
1976 SLD 358,
(1976) 103 ITR 245
|
| Other Citations |
Commr. of Excess Profits Tax v. Shri Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC),
CIT v. Calcutta National Bank Ltd. [1959] 37 ITR 171 (SC),
CIT v. Central Studios (P.) Ltd. [1973] 88 ITR 298 (Mad.),
CIT v. National Storage (P.) Ltd. [1963] 68 ITR 577 (Bom.) - on appeal [1967] 66 ITR 596 (SC),
CIT v. Shaw Wallace & Co. [1932] 2 Comp. Cas. 276; AIR 1932 PC 138,
IRC v. Broadway Car Co. (Wimbledon) Ltd. [1946] 1 All. ER 609 (CA),
Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC),
Narain Swadeshi Weaving Mills v. Commr. of Excess Profits Tax [1954] 26 ITR 765 (SC),
New Savan Sugar & Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
56(2)(iii),
28(i)
|