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TMI Blog2002 (1) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of the Income-tax Act as the income derived by the assessee cannot be said to be from any business carried on by the assessee. 5. The CIT(A) ought not to have allowed different appeals viz, the head of income and the status in the same appeal as the order passed by the Assessing Officer under section 185(1)(b) is an independent proceeding against which a separate appeal ought to have been filed. 6. ............... By its cross-objections in the appeal of the Revenue, the assessee merely supported the order of the CIT(A), and countered the above grounds of the Revenue. 3. The appellant-firm came into existence by a deed dated 1-4-1991. Clause 3 of the partnership deed, relating to the business of the assessee-firm, reads as under "3. The partnership shall be of constructing and letting out or leasing out temporary or permanent buildings, godowns or vacant spaces on daily or monthly basis, and to undertake transport operations and Agricultural farming and any other line of trade or business with the consent of the partners in future." The assessee-firm consists of three partners. The three partners of the assessee-firm were carrying on the same business with effect from 1982 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- After claiming various expenses, assessee's net profit as per the said P&L Account stood at Rs. 79,451.08. 5. The Assessing Officer completed the assessment, accepting the income returned after adding back interest paid to partners, income-tax, etc. of Rs. 99,750. The Commissioner of Income-tax, Vijayawada in exercise of his powers under section 263, set aside the said assessment, on the ground that the assessee derived only rental and interest incomes, and there was no business carried on by the assessee, and that the said rental income has to be assessed under the head 'property' and not under the head 'business'. In support of this stand, the CIT relied upon the following decisions: (1) New Savan Sugar & Gur Refining Co. Ltd. v. CIT [1962] 74 ITR 7 (SC). (2) Narain Swadeshi Weaving Mills v. CEPT [1954] 26 ITR 765 (SC). (3) Guntur Merchants Cotton Press Co. Ltd. v. CIT [1985] 154 ITR 861 (AP). The concluding remarks of the Commissioner in his order under section 263 are as under : "Considering all the above case laws and the facts of the present case, I hold that the rental income of the assessee shall be treated as Income from house property but not under the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Rs. 1,56,000.00 Less: Municipal Taxes Less: 1/5th for repairs Rs. 31,200.00 --------------- Rs. 1,24,800.00 Less: Ground rent paid Rs. 5,664.00 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground that the assessee did not carry on any business, and so, it cannot be treated as a registered firm. His remarks in that behalf are as under "...For claiming registration under section 185(1)(a) of the Act, the assessee should have carried on business. In the absence of any business activity carried on by the assessee, the assessee's request for grant of registration is rejected and the status of the firm is treated as Un registered Firm." 7. The CIT(A), on appeal, was of the view that the Commissioner, in his order under section 263, had only set aside the assessment and did not give any specific directions, and so, the appeal before him was only against the consequential orders passed by the Assessing Officer, and as such the appeal was maintainable. He also considered the validity of the single appeal against separate orders passed by the Assessing Officer under section 143(3) and under section 185(l)(b), and held that a single appeal against two separate orders in the specified context was valid. For this proposition, he relied upon the following decisions- (1) CIT v. Rupa Traders [1979] 118 ITR 412 (Cal.) (2) CIT v. Hansa Agencies [1980] 121 ITR 147 (Bom.) (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the view that the order of the CIT(A) cannot be sustained. It has been claimed before me by the learned counsel for the assessee that the assessee had only constructed certain properties on lease-hold lands, and as such the income from the said property is to be assessed under the head 'business'. He also relied upon the clause (3) of the partnership deed, which we have extracted hereinabove, and on the basis of the said clause, it was emphatically pleaded that the activity of the assessee itself was constructing and letting out the buildings - temporary or permanent - on lands taken on lease or to let out vacant lands taken on lease; and so, it is claimed that the activities of taking on lease some lands, putting up some constructions thereon and letting them out clearly fell within the objects of the firm, and so, the said activity of letting out was in the nature of business activity. As such, it is pleaded that the rental income has to be assessed as business income. In this context, he filed before us written submissions, which are identical to the grounds taken in the cross-objections, wherein reliance was placed on the decisions of the Apex Court in the case of S.G. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le delivering the above judgment relied upon the following decisions-- (a) CIT v. Y.V. Srinivasamurthy [1967] 64 ITR 292 (Mys.), (b) Tinsukia Development Corpn. Ltd. v. CIT [1979] 120 ITR 476 (Cal.). The relevant portion of the head-note of the Hon'ble Calcutta High Court in the case of Tinsukia Development Corpn. Ltd. v. CIT [1979] 120 ITR 466 reads as under: "Whatever be the nature of the activity or the nature of the income, the income of an assessee has to be classified and computed under the specific heads under section 6 of the Indian Income-tax Act, 1922, or under section 14 of the Income-tax Act, 1961. Even if such income arose in the course of the assessee's business, if the same fell clearly under some other head or satisfied the tests of any specific head, then such income has to be classified and computed under that head. Where the term of a lease, being a building lease, provided that the ownership of the structure to be built remained vested in the lessee while the ownership of the site remained in the lessor, and the structures put up on the land were not seasoned structures but could be let out at least for five to six years, then the lease would still be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich income is received. In the case before us, the constructions have been put up on leasehold lands by the assessee, and the constructions as such were not taken on lease. In other words, the assessee is the owner of the constructions in question, which were let out and from which rental income was derived. So, I am of the view that the decision of the Apex Court in the case of S.G. Mercantile Corpn. (P.) Ltd., is distinguishable. Similar is the position with regard to the other decisions relied upon by the learned counsel for the assessee. So, I hold that the rental income derived by the assessee has to be assessed under the head 'house property' and not under the head 'business' but that does not mean that the assessee-firm can be refused registration. 16. In the case of CIT v. Admiralty Flats Motel [1982] 133 ITR 895, Hon'ble Madras High Court held that the meaning of the word 'business' in the Partnership Act is not restricted to the concept as envisaged under the Income-tax Act. The relevant comments of the Hon'ble High Court in the said decision, as per the head-note arc as under: "The classification of various heads of income under the Income-tax Act is only for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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