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Issues involved:
The issue involves whether an assessee-firm is entitled to the benefit of registration under the Income-tax Act, despite the main activity being the letting out of godowns and receiving rental income. Judgment Details: The Income-tax Appellate Tribunal referred the question of the assessee's entitlement to registration under the Income-tax Act to the High Court. The godowns constructed by the assessee were let out to a company, and the rental income was treated as business income with deductions claimed. The Income-tax Officer assessed the income under the business head and granted registration. However, the Commissioner of Income-tax later cancelled the registration, directing the income to be computed as property income. The Tribunal held that while the rental income was from property, the letting out of godowns could be considered a business for partnership purposes, allowing the continuation of registration. The main argument by the Revenue was based on a previous court judgment stating that rental income does not constitute business income. The assessee argued that the partnership was formed for construction and letting out of godowns, thus constituting business income. The court noted that a single act of letting out a property does not qualify as a business without continuous activity. The court referenced previous judgments to support its decision, emphasizing the need for ongoing business activity to classify income as business income. The court disagreed with the assessee's contention that letting out godowns constitutes business income, citing lack of evidence of continuous business activity. It referenced various court judgments to support its decision, highlighting the distinction between property income and business income based on ongoing activities. The court ultimately ruled in favor of the Revenue, stating that the income should be assessed as property income, not business income, and denied the assessee's claim for registration under the Income-tax Act. Therefore, the court answered the question referred by the Tribunal in the negative, supporting the Revenue's position and denying the assessee's entitlement to registration under the Income-tax Act.
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