1. These are four appeals of the assessee relating to assessment years 1982-83 to 1985-86. They arise out of the orders of the CIT (A) dated 17-2-1988 for assessment years 1982-83 and 1983-84 and dated 30-3-1988 for assessment years 1984-85 and 1985-86.

2. The common question at issue in all these four appeals is one and the same. The said issue is whether the lease income derived from leasing out the mill premises along with plant and machinery is exigible to income-tax under the head 'business income' or under the head 'other sources' as contended by the Department. The events which led to the filing of these appeals. In short are as follows:

(a) Assessee is a private limited company, registered by the Registrar of Companies. Andhra Pradesh, Hyderabad on 2-11-1973. The main objects of Incorporation of the Company was to run cotton ginning and oil extraction mill at Door No. 302/2-A of Dokiparru Village in an area of 2 Acres and 84 Cents of land, The said village is situated under the jurisdiction of Sub-registrar of Narsarao Pet in Guntur District. The factory was built in an area of 2 Acres and 84 Cents of land and it was fitted with all necessary plant and machinery, sufficient to run the cotton ginning and oil extraction plant. The objects clause in the Memorandum of Association of the Company, inter alia reads :

"To do all or any of the above things in any part of the world, and either as principals, agents, trustees, contractors or otherwise and either along or in conjunction with others and either by or through agents, sub-contractors, trustees or otherwise."

It is also stated in the objects clause that the assessee-company is entitled to do all such other things as are incidental or conducive in the opinion of the Board of Directors to the above objects or any of them. The authorised capital of the company was Rs. 10,00,000 divided into 1,000 equity shares of Rs. 1,000 each. Calendar year is the previous year chosen by the assessee-company. During the assessment years 1975-76 and 1976-77, assessee conducted its business by itself running the mill, and derived income from cotton ginning and extraction of cotton oil. When the assessee had run the mill on its own, it had incurred losses, and losses only were returned for the purposes of income-tax also. At pages 16 and 17 of the paper-book filed by the assessee, assessment order for 1976-77 was filed, and on pages 18 and 19, assessment order for the assessment year 1977- 78 was filed.

(b) Subsequently, assessee felt it more profitable to lease out the factory building together with plant and machinery installed therein, to any prospective lessee who wanted to run the same as a factory for cotton ginning as well as cotton oil extraction. The Board of Directors of the assessee-company met on 20-2-1976 at the registered office of the company at Guntur and passed the following resolution:

"Resolved to lease out the factory to any sound party and Mr. M.V.R.K. Mutyalu is hereby authorised to negotiate with any prospective lessees and to execute the necessary documents in connection therewith. He is also authorised to affix the seal of the company to any such documents."

The report of the Board of Directors of the assessee-company, together with the resolution passed at the Broad of Directors' meeting on 20-2-1976 were furnished at pages 6 to 9 of the paper book filed on behalf of the assessee. At page 9, we come across a part of the Report of the Board of Directors, which is as follows :

"We have crushed 15,847.67 Qtls. of Cotton seed and our production of oil is 1979.49 Qtls. and Cake is 13,245.00 Qtls. As the conditions are not favourable even in the early part of this year, to avoid further losses. it was thought desirable to give the factory on lease. The factory was leased out as per Board's resolution dated 20-2-1976 to M/s. Bharat General and Textile Industries Limited, Calcutta and Guntur for a rent of Rs. 1,00,000 for the period ending with 3lst December. 1976."

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