COMMISSIONER OF INCOME TAX Vs. SURESHINI MITTAL

JUDGEMENT

(1.) The Income Tax Appellate Tribunal at the instance of the Commissioner of Income Tax, Agra has referred the following question of law under Section 256 (1) of the Income Tax Act 1961 (hereinafter referred to as the Act) for opinion to this Court:-

(2.) The assessment year involved in the present reference is 1981-82. The brief facts of the case are as follows:- The assessee respondent derived income from a picture hall namely Sant Talkies. She became the owner of the Sant Talkies w.e.f. 31st July 1979. Earlier Sant Talkies was property of a partnership firm namely Surendra Kumar Sureshini Mittal. The said partnership firm was not carrying on the business of film exhibition in that cinema hall but hired it out to M/s. Sant Talkies, Ferozabad. In the said firm the assessee respondent was one of the partners. The income derived by the firm from M/s. Sant Talkies was being assessed as business income of the firm. The assessee became the sole owner of the Sant Talkies on account of dissolution of the partnership firm by means of the dissolution deed dated 31st July 1979. The assessee took the assets and liabilities, including the picture hall Sant Talkies as a result of dissolution of the partnership firm. In the relevant assessment year, the Income Tax Officer was of the view that the assessee had never carried on the business of film exhibition with the assets of Sant Talkies and therefore the rental income realised by the assessee from Sant Talkies is to be taxed under the head income from house property. He rejected assessee's claim to be assessed on the said income under the head "business". The Income Tax Officer computed the income accordingly. But he allowed the depreciation on the electric fittings, air conditioner, furniture, sanitary fittings, machinery, electric fans etc. The Appellate Assistant Commissioner in appeal against the assessment order found that the income from letting out the Sant Talkies altogether with machineries thereon has to be accepted as income from business. He also found that the machinery hired out was inseparable from the leasing out of Cinema Hall. The said order of the Appellate Assistant Commissioner has been confirmed by the Tribunal in second appeal.

(3.) Heard Shri Dhananjay Awasthi, the learned standing counsel for the department in support of the reference. Nobody appears for the assessee respondent.