HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax
Civil Appeal 145 of 1953
[1955] 1 SCR 952 ·
Excess Profits Tax Act 1940, sections 2(5), 5, 10A · Income-tax Act 1922, section 66
Sources & disclosures includedDownload original judgment / order
5-judge bench · Mehr Chand Mahajan C.J. · S. R. Das · Ghulam Hasan · Bhagwati · Venkatarama Ayyar
Assessment years: Chargeable accounting periods ending 31 March 1942, 1943, 1944 and 1945
01 · Facts of the case
After transferring its factory land and buildings to a company, a manufacturing firm stopped manufacturing and leased the remaining machinery for Rs. 40,000 annually. Revenue amalgamated its income with associated managing and selling agency firms under section 10A.
Source: Primary report: SCR 953–959
02 · Discussion by the Hon’ble Court
Existence of an assessee business within section 5 was a prerequisite to section 10A, not something that could be established through the anti-avoidance conclusion itself. The machinery had ceased to be the firm’s commercial asset after complete closure; this differed from temporary letting during an ongoing business. Business is assessed on the particular facts; an isolated adventure can qualify but rent does not necessarily do so.
Source: Primary report: SCR 959–963
03 · Judicial decision
The Court answered the leasing question negatively, restored the assessee’s first question on validity of amalgamation and answered it negatively, and answered the second question negatively as a corollary. Appeal allowed with costs.
Source: Primary report: SCR 963–964
04 · Outcome / in whose favour
Assessee succeeded.
Source: Primary report: SCR 963–964
05 · AKHB REVIEW POINT
Test the charging jurisdiction before applying the anti-avoidance adjustment. The conclusion concerns complete closure and disposal of the factory premises, not a general rule that machinery rental is never business.
Source: Primary report: SCR 960–964
Source & verification
Download original judgment / order · Open cited source rendition
Complete 13-page primary report, including any adjoining report boundary fragments retained in the exact source bytes.
Statutory scope
Historical predecessor legislation only; this is not a decision applying the Income-tax Act, 1961. Verify the applicable statutory text separately.
Later treatment
Source checked 2026-10-21. Subsequent treatment and current-law applicability have not been comprehensively checked.
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AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from an identified primary report. Independent human review is not represented.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, applicable statutory version and subsequent treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court’s holding. No current-law clearance is claimed.