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Smt. Kavit Sanghi Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Civil Case No. 12 of 1979
Judge
Reported in[1982]133ITR48(MP)
ActsIncome Tax Act, 1961 - Sections 14 and 33
AppellantSmt. Kavit Sanghi
RespondentCommissioner of Income-tax
Appellant AdvocateG.M. Chatterjee, Adv.
Respondent AdvocateS.C. Bagadiya, Adv.
Excerpt:
.....exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. - and charging rent therefor by the assessee was a transaction in the nature of trade, but was clearly a transaction in the nature of an investment. 4. now, it is well settled that the several heads of income mentioned in section 14 of the act are mutually exclusive, each head being specific to cover the income arising from a particular source and if the income under consideration is taxable under the head 'profits and gains of business or profession',it cannot be taxed as income from other sources......by the assessee from the hiring of the air-conditioning plant should be assessed under the head 'business income' (2) whether, on the facts and in the circumstances of the case, the assessee is entitled to claim development rebate in respect of the air-conditioning plant under section 33 of the income-tax act, 1961 ?' 2. the facts giving rise to this reference as set out in the statement of the case are as follows: the assessee, an individual, derives income from house property, insurance commission and hire charges in respect of air-conditioning equipment. the assessment year involved is 1974-75 for which the accounting period is the financial year ending march 31, 1974. during the accounting period the assessee purchased an air-conditioning equipment and leased it out to m/s......
Judgment:

Vijayvaegiya, J.

1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law for the opinion of this court:

'(1) Whether, on the facts and in the circumstances of the case, the income received by the assessee from the hiring of the air-conditioning plant should be assessed under the head 'Business income'

(2) Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim development rebate in respect of the air-conditioning plant under Section 33 of the Income-tax Act, 1961 ?'

2. The facts giving rise to this reference as set out in the statement of the case are as follows: The assessee, an individual, derives income from house property, insurance commission and hire charges in respect of air-conditioning equipment. The assessment year involved is 1974-75 for which the accounting period is the financial year ending March 31, 1974. During the accounting period the assessee purchased an air-conditioning equipment and leased it out to M/s. Esso Company Ltd. at Bombay, under an agreement, on a rent of Rs. 4,114 per month. The assessee claimed that.the income of hiring from-this source should be assessed under the head 'Business' and that development rebate may be allowed on the said equipment. The ITO rejected the claim of the assessee and held that the air-conditioning plant was given by the assessee on hire for a period of only three years and hence it cannot be considered to be the regular business of the assessee. The ITO assessed this income of the assessee under the head 'Other sources' and refused to grant development rebate. On appeal by the assessee, the AAC upheld the finding of the ITO and concluded that the financing of the installation of the air-conditioning equipment for M/.s. Esso Co. Ltd. and charging rent therefor by the assessee was a transaction in the nature of trade, but was clearly a transaction in the nature of an investment. On further appeal by the assessee, the Income-tax Appellate Tribunal upheld the order of the ITO. It held that the air-conditioning equipment was not a commercial asset of the assessee and its exploitation by leasing out on hire did not constitute business activity on the part of the assessee. At the instance of the assessee, the Tribunal has referred the aforesaid questions of law for the opinion of this court.

3. In this reference, the real question involved is question No. 1 because if that question is answered in favour of the assessee and it is held that the income received by the assessee from the hiring of the air-conditioning plant is liable to be assessed under the head 'Business income', it is not disputed by the revenue that the assessee in that case would be entitled to claim development rebate in respect of the said air-conditioning plant under Section 33 of the Act.

4. Now, it is well settled that the several heads of income mentioned in Section 14 of the Act are mutually exclusive, each head being specific to cover the income arising from a particular source and if the income under consideration is taxable under the head 'Profits and gains of business or profession', it cannot be taxed as income from other sources. The Tribunal has refused to treat the income from the hiring of the air-conditioning equipment, derived by the assessee as profits and gains of business on the ground that in the past the only source of income of the assessee were from property and insurance commission and it was only during the relevant accounting period that the assessee purchased an air-conditioning equipment and leased out the same on monthly rent under an agreement entered into with M/s. Esso Company Ltd., Bombay. In our opinion, the fact that the assessee for the first time acquired a commercial asset during the previous year cannot be a ground for not treating the income from that asset as profits and gains of business because if this was so a person who commences a business in a particular year will not be entitled to claim that the income from that business be taxed as profits and gains of business. We are also unable to appreciate the observation of the Tribunal that the said air-conditioning equipment was never used by the assessee for the purpose of her own business. It is not the case of the revenue that the air-conditioning equipment was acquired by the assessee for her personal use and not as a commercial asset and it was subsequently given cm; hire by the assessee. If that was so different considerations would have arisen. In the present case, the assessee acquired the air-conditioning plant as a commercial asset and gave it on hire. In the absence of any material to show that the air-conditioning equipment was not acquired by the assessee as a commercial asset and was acquired by her for any other purpose, we are of the opinion that the Tribunal was not justified in holding that the income derived by the assessee from hiring the air-conditioning equipment was not chargeable as profits and gains of business and was chargeable to tax as income from other sources. On the facts and in the circumstances of the case, we are of the opinion that the income derived by the assessee from hiring the air-conditioning equipment was properly taxable under the head 'Profits and gains of business '. Our answer to question No. 1 referred to us is that, on the facts and in the circumstances of the case, the income received by the assessee from the hiring of the air-conditioning plant should be assessed under the head 'Business income',

5. Our answer to question No. 2 is that, on the facts and in the circumstances of the case, the assessee is entitled to claim development rebate in respect of the air-conditioning plant under Section 33 of the I.T. Act, 1961.

6. The reference is answered accordingly. In the circumstances of the case,the parties shall bear their own costs of this reference.


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