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The Commissioner of Income Tax & Another Versus M/s. Auto Sales Properties Alld.

2015 (4) TMI 192 - ALLAHABAD HIGH COURT

Registration of firm under u/s 186 (1) cancelled - Genuity of firm questioned - same property belonging to husbands was surreptitiously transferred to their wives through the camouflage of a firm to evade tax - ITAT holding that a genuine firm was in existence - Held that:- Nothing has been brought before us to show that letting out immovable property on rent will never constitute a business and income derived from letting out immovable property i.e. rent would not constitute a business income a .....

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from business in profession. In the present case, the Tribunal as a last court of fact has recorded a specific finding in favour of assessee and in the absence of anything to show that the same is perverse or contrary to record or based on misreading, we do not find any reason to take a different view.Tribunal was justified in law in holding that the assessee firm is entitled to registration. - Decided in favour of assessee. - Income Tax Appeal No. - 101 of 1999 - Dated:- 10-3-2015 - Hon'ble .....

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n holding that a genuine firm was in existence without appreciating the facts that the same property belonging to husbands was surreptitiously transferred to their wives through the camouflage of a firm to evade tax. (ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee firm is entitled to registration." 3. It is not disputed that a partnership firm was constituted in accordance with the provisions of Partnership Act, .....

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nd the Assessing Officer vide order dated 03.02.1988 accepted registration of firm under Income Tax Act, 1961 (hereinafter referred as to 'Act, 1961'). Subsequently, registration of firm under Act, 1961 was cancelled by the Assessing Officer under Section 186 (1) vide order dated 7.4.1993 on the ground that firm was not carrying on any business but was deriving income only from letting out property which was income liable to be computed in accordance with section 22 to 27 of Act, 1961 i. .....

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He also could not dispute that existence of firm as such is not doubted and the brood proposition is not correct. 6. In the present case, business activities for which firm was constituted, mentioned in the partnership deed, read as under : "a) To purchase, take on lease or otherwise acquire, sell, dispose of land with or without building thereon at such price or rent and under and subject to such terms and conditions as to title or otherwise; b) To acquire and take over the properties, un .....

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ss allied or incidental to the aforesaid business;" 7. From the facts as borne out from record, it appeared that property known as Auto Sales Building, was the business assets of M/s. Auto Sales. This firm was dissolved on 31.10.1978. The firm property situated at 18- P.D. Tandon Road, Allahabad was alloted to Sri Brij Mohan Gupta and Sri Anil Gupta having 1/3 share each. The income from house-property situated at 18-P.D. Tandon Road, Allahabad belongs to Sri B.M. Gupta and Sri Anil Gupta. .....

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of 47% each and 3rd Sri S.C. Lal Agarwal having share of only 6%. This was a clandestine attempt to evade tax in the garb of forming a firm. 8.It took a view that consideration of the aforesaid firm only for the purpose of earning rental income is nothing but an attempt to evade tax. No genuine firm for undertaking any 'business activity' was constituted. It further observed that as per partnership deed, only business activity mentioned is for collecting rent etc. which would not consti .....

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tioned in partnership-deed, it also took a view that taking property on lease and carrying on business of collection rent etc. may constitute a 'business' activity and there is no proposition that such activity cannot be treated a business activity in any circumstance. 10. Before us an incidental question raised is "whether such activities may constitute a business activity so as to bring the income of rent within terms of business income or not". 11. The term 'business' .....

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an income would fall under the head of profits and gains of business or profession or not and the relevant observations are reproduced herein below : "No precise test can be laid down to ascertain whether income (referred to by whatever nomenclature, lease amount, rents license fee) received by an assessee from leasing or letting out of assets would fall under the head ' Profits and Gains of business or profession; It is a mixed question of law and fact and has to be determined from the .....

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ly hire of ₹ 5000/-. Considering the aforesaid facts, it would be an income from business. The Court said that the object of asesseee was to acquire land and buildings and after investments either sell or let them out. It was held that whether a particular letting is business activity or otherwise has to be decided in the circumstances of the each case; the determination would be from the perspective of the businessman. A commercial asset is only an asset used in a business and nothing els .....

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of Income Tax, Calcutta, [1972] 83 ITR 700 (SC), the Court said that dealing with any real property, as also activity of talking a property on lease, setting up a market thereon and letting out shops and stalls in the market can constitute business activity. 16. In Attukal Shopping Complex P. Ltd. v. Commissioner of Income Tax, [2003] 259 ITR 567 (Kerala), the Court held that income from building forms parts of business and property. 17. In the present case, the Tribunal as a last court finding .....

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d at 18- P.D. Tondaon Rorad, Allahabad and was managing the same. The assessee firm was preparing and submitting balance sheet, a copy of which has been filed at page 16 of the paper book. The receipts of rent etc. find place at pages 17, 18, 22 and 28. At page 41 to 42 of the paper book, this is a deed which was executed on 5.2.1988 between Auto Sales properties through its partners Smt. Madhu Gupta with the New India Assurance Co. Ltd. All these documents go to show that the firm really existe .....

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firm was in existence, and it was engaged in business activities in accordance with the partnership deed. Revelant findings recorded by Tribunal in para-7, read as follows : "On the other hand, it is found that a genuine firm was in existence and it was engaged in the business activities in accordance with the partnership deed. The documents filed by the assessee amply support such a finding. The mere fact that the property taken on lease by the firm belonged to the relative of the partners .....

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patently deliberate. 22. In Commissioner of Income Tax vs. Mukundray K. Shah, [2007] 290 ITR 433 (SC), the Court said that High Court ought not to have interfered with a finding of fact recorded by the Tribunal which is not shown perverse. 23. In Commissioner of Income Tax v. P. Mohanakala, [2007] 291 ITR 278 (SC), the Court held that the concurrent finding of facts, predicated on material available on the record cannot constitute questions of law much less substantial question of law. This is .....

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rent therefrom so as to bring the profits within the ambit of income from business in profession. In the present case, the Tribunal as a last court of fact has recorded a specific finding in favour of assessee and in the absence of anything to show that the same is perverse or contrary to record or based on misreading, we do not find any reason to take a different view. Question no. 1, therefore, is liable to be answered in favour of assessee and against the revenue. 26. Learned counsel for rev .....

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uestions involved in this appeal. 28. In CIT vs. Saran Holding (P.) Ltd. (Supra) assessee himself admitted that the profits/income, it is receiving, is not the business income. The assessee was the owner of property and had let out the same to different persons on rent. The Court in the facts of the case and admission of assessee came to the conclusion that it was an income from house property 29. In Thayyil Enterprises v. ITO (Supra), looking to the concurrent findings recorded by Income Tax Au .....

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