The main legal point established in the judgment is that the income derived from letting property cannot be regarded as the profits and gains of a business if the holding and letting of such property is not the sole or main function of the company.

HARRIES, C. J.

1. THIS is a reference under s. 66(1) of the Indian IT Act, made by the Tribunal, Madras Bench, in which the following question is propounded for the opinion of this Court :

" Whether in the facts and circumstances of the case, the income in question, viz., Rs. 2,000, was rightly treated as the income from business for excess profits tax purposes ? "

2. THE facts giving rise to this litigation may be shortly stated as follows : THE assessees are a limited liability company carrying on business as manufacturers of jute products. THE assessees had let a portion of their business premises to a firm known as Radha Kant and Co. who were conducting the business of dehydrating potatoes. THE assessees claimed that the rent payable by Radha Kant and Co. had not been fixed and that there was a dispute concerning it. Hence their return did not show any rent received in respect of this letting. THE ITO did not accept this contention and estimated the income from this letting for ten months of the assessable year at Rs. 2,000. This amount was added to the income of the company for the purpose of assessing excess profits tax. THE assessee company appealed to the AAC from the order of the ITO, but the appeal was dismissed. THEre was a further appeal to the Tribunal and there it was contended that the sum of Rs. 2,000 could not be taken into account for the purposes of assessing the income liable to excess profits tax. THE appeal was however dismissed as in the view of the Tribunal this sum of Rs. 2,000 was rightly taken into consideration for the purposes of excess profits tax. THE Tribunal pointed out that the assessee company let other portions of their premises to various tenants for use as godown and had received from these tenants yearly a sum of about Rs. 37,000. This sum, the Tribunal point out, was shown by the assessee-company as part of their income from business and they were accordingly assessed in respect of it under s. 10 of the IT Act. THE assessee company apparently denied this before the Tribunal, but the Tribunal point out that the actual assessments show that in respect of this income they were assessed under s. 10 of the Act. Further the Tribunal point out that the memorandum of association of the assessee-company permits them to purchase, sell, hire and let lands, buildings, warehouses, etc. Those being the circumstances the Tribunal were satisfied that the assessees were carrying on " an operation of business when it was regularly letting out a portion of its business premises to third parties.

" THE Tribunal accordingly held that this sum of Rs. 2,000 payable in respect of the portion of the premises let to Radha Kant and Co. was to be assessed as part of the business income.

The Tribunal relied in the main for its finding on r. 4, sub- r. (4), of Schedule I, of the EPT Act, 1940. This sub-rule reads as follows :

" In the case of a business which consists wholly or partly in the letting out of property on hire, the income from the property shall be included in the profits of the business whether or not it has been charged to income-tax under s. 9 of the Indian IT Act, 1922, or under any other section of that Act. " In the view of the Tribunal the business of the assessees consisted partly in letting out property on hire and therefore the income derived from such letting was rightly included in the profits of the business. It will be seen that this rule deals with cases where a business consists wholly or partly in letting out property and before it can apply, the letting of the property must be wholly the business of the company or at least part of the business.

3. IN the IT Act, 1922, " business " is defined in s. 2(4). The term " business ", it is said, includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. It has been held by this Court in the case of IN re, Commercial Properties Ltd. 1928 ILR 55 Cal 1057 that owning property and car