COMMISSIONER OF INCOME TAX Vs. VEERABHADRA INDUSTRIES

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal referred the following question under Section 256(1) of the Income-tax Act, 1961, for the opinion of this court at the instance of the Revenue ;

(2.) THE facts in brief are that the godowns constructed by the assessee have been let out to Aries Agro Vet Industries (P.) Ltd., the rental income from the godowns has been shown as business income and deductions like depreciation and miscellaneous expenses are claimed. THE Income-tax Officer assessed the rental income under the head "business" after allowing deductions claimed by the assessee for the assessment years 1979-80 and 1980-81. He also granted registration for the two assessment years. THE Commissioner of Income-tax initiated proceedings under Section 263 of the Income-tax Act. After considering the submissions of the assessee, he cancelled the registration granted by the Income-tax Officer under Section 185(1) of the Act. He directed the Income-tax Officer to recompute the income from letting out of the godown as income from the property in accordance with Sections 22 to 27 of the Act. Against that the assessee filed appeal. THE Tribunal held that the rent received from letting out of the godown was income from property, however, it held that letting out of the godowns can be considered as business for the purpose of partnership and on this issue, the assessee is entitled for continuation of registration, in other words, notwithstanding the fact of the income of the assessee, the assessee is still entitled for registration under Section 185(1)(a) of the Act At the instance of the Revenue, the question extracted in the earlier paragraph was referred for the opinion of this court.

(3.) HE vehemently contended that income from letting out of the godowns is business income and therefore they are entitled for registration under Section 185(1)(a) of the Act. It is difficult to accept the contention of learned counsel for the assessee because a single act of constructing a godown and letting it out cannot be treated as a business. The expression "business" contemplates continuous activity from year to year. There is no evidence that the assessee is continuing the activity of constructing godowns and letting them out from year to year. There is no material that he has constructed a godown in this year. Therefore, the income from a simple letting out of the godown cannot be treated as business income for the purpose of the Income-tax Act. When once it is not business income the question of availing of benefit under Section 185(1)(a) of the Act does not arise. The income has to be assessed as income from property in accordance with Sections 22 to 27 of the Income-tax Act. We are fortified in our view by a judgment of this court in Phabiomal and Sons' case , wherein it was held that letting out a building and realising rents therefrom did not amount to carrying on of business. It is true that the Punjab and Haryana High Court in Nauharchand Chananram's case , took the view that letting out of a factory amounts to carrying on business. With respect we disagree with the view expressed by the Punjab and Haryana High Court. The judgment in Ldkshmi Company's case , is distinguishable from the facts of the case. It is a case where the assessee went on putting up additional constructions and letting it out to various tenants which was in the nature of business activity, because, as pointed out in the earlier paragraph, it is a case where there is continuous activity and therefore that judgment is distinguishable on facts.