KAVIT SANGHI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(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:

(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.) 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.