9911796707
TMI Blog1979 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... y and the income from all these sources were assessed in the asst. yrs. 1964-65 & 1965-66. In the asst. yr. 1966-67, the assessee let out the oil mill by a lease dt. 2nd April, 1965 for a period of 2 years. This lease was renewed on 14th Aug., 1967 for a further period of one year and again on 5th July, 1968 for a further period of five years and later on 5th April, 1973 for another period of five years on the same terms and conditions. The assessee thus realised an annual rent in respect of the Oil Mill instead of deriving income by running it itself. In the asst. yr. 1966-67 to 1969-70 the rent realised was included in the income of the Head Office and assessed as part of the business income of the assessee. It is to be noted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a firm had been validly constituted for the purpose of carrying on business, the fact that business ceased at any time could not mean that the firm ceased to exist. It was submitted that though the carrying on of a business may be a requiste purpose for the formation of the firm, it was not necessary for the continuance of the firm. Reliance was placed on the decision of the Punjab and Haryana High Court in the case of Nauhar Chand Chananram(1). Secondly, it was submitted that under s. 184(7) it was mandatory on the part of the ITO to grant registration for the subsequent assessment years once the conditions under that section were fulfilled especially when these conditions did not include any requirement that business should be carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Mill was not let out as a mere capital asset but as a commercial asset for the lessee was not entitled to use those assets in whatever way he pleased but could use it only for running it as Rice Mill. Prima facie, therefore, the income was earned by exploiting the Mill as a commercial asset and the income was income from business even though it was derived by leasing out the mill and not by running the mill. The objection of the Revenue rested on the fact that the said income had been assessed under the head income from other sources for the past few years and that the amount was an annual receipt having no relation to the profitability of the Mill. The assessee has countered this objection by pointing out that at the inception for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court itself pointed out that whether a particular activity amounts to any trade must be decided in the background of its own facts, it is significant that in that case the lease deed provided that the lessee will bear all expenditure including those of a capital nature. In the present case, however, the assessee has to bear all capital expenses and hence, we are of the opinion, that the Oil Mill did not cease to be a commercial asset and that the letting out was only an exploitation of the commercial asset with the consequence that the income derived thereby must be assessed only as income from business. On this finding itself it has to be held that there is no justification for the ITO to consider that the assessee was not carrying on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modes recognised by the Act. The firm can be dissolved as provided by Chapter VI either by agreement, or by adjudication of any of the partners as insolvent, or by the business becoming unlawful, or by the expiry of the fixed term or the completion of the undertaking or by death of a partner or in the case of partnership at will by a partner giving notice in writing. There are also provisions in that Chapter for the dissolution of the firm through intervention of Court. But the basic factor is that the dissolution of the firm can take place only either by agreement or by the process of law. Though an agreement to carry on the business may be required for the information of the firm, the cessation of the business is not a mode of dissolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it sharing ratio among the partners and s. 184 does not envisage any enquiry into the existence or genuineness of the firm once it has already been granted registration in the earlier year. We may note, however, that under s. 186 registration of a firm may be cancelled if the ITO is of the opinion that during the previous year there was no genuine firm in existence as registered. This section provides for the cancellation only with the previous approval of the IAC of IT and it is not the case of the Revenue that the action of the ITO was taken under this section. In any event even though the genuineness of the firm will include its legal existence, that question would have been dependent upon as we have already found the provisions of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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