LexCOMMISSIONER OF EXCESS PROFIT TAX BOMBAY CITY versus SRI LAKSHMI SILK MILLS LTD.
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i 1 The Supreme Court Reports. COMMISSIONER OF EXCESS PROFIT TAX BOMBAY CITY v. SRI LAKSHMI SILK MILLS LTD. [ SAIYID FAZL ALI, MEHR CHAND MAHAJAN AND MuKHERJEA JJ.] Excess Profits Tax Act (XV of 1940), s. 2 (5)-"lncome from business"-Manufacturing company-Rent o:f plant and machin· ery let out to others-Whether income from business. The respondent, a company formed for the purpose of manu- facturing silk cloth, installed a plant for dyeing silk yarn as a part of its business. During the chargeable accounting period (1st January, 1943, to 31st Decembell, 1943) owing to difficulty in obtaining silk yarn on account of the war, it could make no use of this plant and it remained idle for some time. In August, 1943, the pl_ant was let out to' another company on a monthly rent. The question being whether the income received by the respond- ent company in the year 1943 by way of rent of this plant was income from business and assessable to excess profits tax, the High Court of Bombay held that, as the assessee was not able to use the plant as a commercial asset, it had ceased to be a com- mercial asset. in the assessee's hands and the rent received was not income from business. On appeal: Held, that an asset which was acquired and used for the pur- . pose of the business by a company formed for carrying on busi- ness and earning profits, does not cease to be . a commercial asset of that business as soon as it is temporarily put out of use or let out to another person for use in his business or trade ; the income from the asset would be profit of the business irrespective of the manner in which that asset is exploited by the owner, and the rent in question was therefore income from business and assess- able to excess profits tax. No general principle, however, can be laid down which is applicable to all cases. Each case has to be decided on its own circumstances. . Sutherland v. Commissioners of Inland Revenue [1918] 12 Tax Cas. 63 relied on. Inland Revenue Commissioners v. Iles (1_?47] 1 A.E.R. 798, Croft v. Sywell Aerodrome Co., Ltd. [1942] 1 A.E.R. 110, Inland Revenue Commissioners v. Broadway Car Co., Ltd. [1946] 2 A.E.R. 609 distinguished. Judgment of the Bombay High Court reversed. 1951 Sept. 18. 1951 Commissioner of Excess Profits Tax, Bombay City v. Sri Lakshmi Silk Mills Ltd. SUPREME COURT REPORTS [1952] CML APPELLATI! J U!USDICTION : Civil Appeal No. 46 of 1950. Appeal by special leave from a judgment of the High Court of Judicature at Bombay dated 23rd March, 1948, (Chagla C.J. and Tendolkar J.) in Income Tax Reference No. 16 of 1947. M. C. Setalvad, Attorney-General for India ( Gopal Singh, with him) for the appellant. N. C. Chatterjee (B. Sen, with him) for the res- pondent. 1951. September 18. The Judgment of the Court was delivered by MAHAJAN J.-The sole controversy in this appeal centres round the point as to whether or not excess profits tax is payable on the sum of Rs. 20,005 received by the respondent from Messrs Parakh & Co. by way of rent for the dyeing plant let out to them during the chargeble accounting period. The respondent (Sri Lakshmi Silk Mills Ltd.) is a manufacturer of silk cloth, and as a part of its business t it installed a plant for dyeing silk yarn. During the • chargea\jle accounting Jl<lr~od (1st January, 1943, to 31st December, 1943) owing to difficulty in obtaining silk yarn on account of the war it could make no use of this plant and it remained idle for some time. On the 20th August, 1943, it was let out to Messrs E. Parakh & Co. on a rent of Rs. 4,001 per month. The Excess Profits Tax Officer by his assessment order dated 11th June, 1945, included the sum of Rs. 20,005 t realized as rent for five months, in the profit~ of the business of the respondent and held that excess profits .. tax was payable on this amount. This order was confirmed on appeal by the Appellate Assistant Com- missioner and on further appeal by the Income-tax Tribunal. The Tribunal, however, on being asked referred the following question of law to the High Court for its opinion : "Whether in the circumstances of the case, the ... assessee's income of Rs. 20,005 is profits from business * \ i -+- .S.C.R.- SUPREME COURT REPORTS _3 .within the meaning of section Profits Tax Act and therefore 2 (5) of the Excess 1951 pay excess profits tax?" or otherwise liable to_ .,. . . _ / -
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