JUDGMENT
A. Raghuvir, C.J.
1. Two questions are, referred to this court under Section 256(1) of the Income-tax Act, 1961. The questions read as under :
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income derived from lease rent of the building with plant, machinery, furniture and fixtures relating to the Anjali Cinema at Shillong is assessable as income from business and not as income from other sources for the assessment years 1966-67 to 1971-72 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that development rebate was admissible under Section 33 of the Income-tax Act, 1961, on the cost of the plant and machinery let out for the assessment year 1966-67 ?”
2. Ganeshdass Sreeram is a registered firm. The firm, in the assessment for the assessment years 1966-67, 1967-68, 1968-69, 1969-70, 1970-71 and 1971-72, claimed rents obtained by the firm as business income. The Income-tax Officer held that the income is not business income but is income from other sources for the six years. On appeal, the Appellate Assistant Commissioner confirmed the order. On further appeal, the Tribunal reversed the finding and allowed the appeal. Thereupon, at the instance of the Revenue, the above two questions are referred to this court.
3. The assessee was carrying on business in exhibiting motion pictures. The firm runs, theatres “Kelvin” at Guwahati, and “Biju” at Shillong. Regarding “Anjali”, the assessee invested Rs. 9,26,295 for construction of a building at Shillong which is involved in the present reference. The particulars are building Rs. 5,67,414, furniture Rs. 68,839, machines Rs. 2,01,329, heating and cooling Rs. 36,300 and electricity Rs. 52,413. The total amount is Rs. 9,26,295. There was an undisclosed source for Rs. 60,000 which was also added to the above amount.
4. The assessee intended to start the Anjali Cinema at Shillong but the firm could not obtain the licence for running the theatre and, therefore, the theatre was let out to one H. O. Unger who had a licence for running a cinema theatre. In the rental agreement, it was stipulated that the firm is to attend to major repairs of furniture, fixtures and machineries. The decoration of the hall or replacing of chairs was to be attended by H. 0. Unger with the permission of the firm. The tenancy was to be terminated by giving one calendar month’s notice. The assessee let out Anjali Cinema thereby to H. O. Unger as he possessed a licence for running a cinema. The moment the firm got the licence, it was agreed that the firm is to terminate the lease and run this business.
5. The Tribunal held that the rental income from the Anjali Cinema would be business income because the assessee constructed the building, equipped it with plant and machinery, furniture and fixtures but could not run the theatre as a licence could not be obtained. It is seen subsequently that the assessee obtained the licence and is running the theatre and has renewed the licence from time to time.
6.
Learned counsel for the Revenue relied upon the case, Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC), wherein it was held that whether a particular letting of premises is business has to be decided in the circumstances of each case. Each case has to be looked at from a businessman’s point of view to find out whether the letting was business or the exploitation of property as an owner.
7. A commercial asset is only an asset used in a business and business can be carried on with practically all things. A similar decision is found in New Sevan Sugar and Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC) where the intention of the assessee was to part with the entire machinery of the factory for the obvious purpose of earning rental income and not to treat the factory and the machinery as a commercial asset during the subsistence of the lease. These two cases show the tests.
8. We see that the intention of the assessee was not to let out the building. The intention was to run the theatre as the firm had invested Rs. 9,26,295 towards the construction of the theatre. Since the assessee had no licence, the assessee had to lease it out on rent. The facts do show that the theatre was ready for exhibition. When the licence was accorded, the assessee is running the theatre and is periodically getting the licence renewed.
9. From the above, the Appellate Tribunal held that the rent from the Anjali Cinema was business income and that that conclusion suffered no vice whatever.
10. We answer the first question in the affirmative, in favour of the assessee and against the Revenue. In view of the answer to the first question, we answer the second question also in the affirmative, in favour of the assessee and against the Revenue. No costs.