JUDGMENT
V.K. Singhal, J.
1. The Income-tax Appellate Tribunal has sent the above two references arising out of its order. Since the questions involved in both the cases are common the same are disposed of by this single order. In Reference No. 53 of 1981, the matter relates to the assessment years 1977-78 and 1978-79 and the following question has been raised :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rental income received by the assessee was assessable under the head ‘Income from business’ ?”
2. In Reference No. 36 of 1982, the following question has been raised:
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Commissioner of Income-tax (Appeals) that the rental income received from the Food Corporation of India is assessable under the head ‘Income from business’ (sic) and in setting aside the assessment to be made afresh in the light of the Tribunal’s order dated December 26, 1979, for the assessment years 1977-78 and 1978-79 ?”
3. The brief facts of the case are that the assessee-company was allotted land by the Director of Industries for setting up an auto lamp factory. The project could not materialise and some constructions were made on the land up to the level of plinth only. The land was let out to the Food Corporation of India and it was claimed that the receipt from the Food Corporation of India is assessable as income under the head “Income from other sources” and not under the head “Income from property”. The Income-tax Officer did not accept the contention of the assessee and treated the income as from property.
4. In the appeal preferred before the Commissioner of Income-tax, it was contended that the income received by the company was income from business and the building has been constructed up to the plinth level and it was temporarily let out for a year to the Food Corporation of India. The Commissioner of Income-tax (Appeals) held that the business has not yet been set up and, therefore, the rental income could not be considered as business income. The Commissioner of Income-tax came to the conclusion that the rental income could not be considered as income from property since the construction was only up to the plinth level and it was not the building but land that was let out and as such the income should be assessed as income from other sources.
5. The assessee challenged this matter before the Income-tax Appellate Tribunal where it was contended that a commercial asset for its exploitation has come into existence and, therefore, the amount received was business income and the direction to assess the same under the head “Income from other sources” is not justified. The Income-tax Appellate Tribunal came to the conclusion that the project did not materialise and some of the constructions were made on the land and the assessee has treated the said property as a commercial asset in its books of account. The assessee had the intention to exploit the commercial asset. The Income-tax Appellate Tribunal came to the conclusion that the income should be assessed as “business income”.
6.
The submission of learned counsel for the Revenue is that there was no commercial asset which could be exploited and, therefore, the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the receipt of rent from the Food Corporation of India should be considered as “income from business”.
7. If there is any intention to exploit the commercial asset and the same is leased out the income therefrom would be business income. It has not been stated that the business of the assessee-company was to take out the land and rent it out. The constructions which have been made thereon are incomplete and have not been shown to be of any use as a commercial asset. A commercial asset is an asset which is used in a business. Land with plinth cannot be considered to be a commercial asset. A commercial asset may not be temporarily used but for that reason it will not cease to be a commercial asset. The income from a commercial asset will be income from business only when there is a letting out of a commercial (business asset) and the said letting is temporary. If the business has not yet been started or is not capable of being started then no commercial asset can be said to have come into existence. Similarly, if the business is closed down then the asset ceases to be a commercial asset. In the present case though initially the agreement was for one year and has been renewed from time to time no commercial asset has come into existence from which any business could have been carried on. Simply because the expenditure incurred in construction up to the plinth level has been shown as a commercial asset in the books of account it will not change the character of the income which has been received only on account of storage facility which has been provided by letting out the land to the Food Corporation of India.
8. In these circumstances, we are of the view that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the income from letting out of the land to the Food Corporation of India is the income from business.
9. Accordingly, the reference is answered in favour of the Revenue and against the assessee. No orders as to costs.