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TMI Blog1970 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 partners. These ten partners emanated from two families known as Nauharchand Chananram and Bishanmal Reluram. The dispute relates to the assessment year 1960-61 and arose on the application of the assessees for the renewal of the registration of the firm under section 26A of the Income-tax Act, hereinafter referred to as the Act. In the deed of partnership, in clause (3), it is clearly stated : "That the business of the firm is and shall be that of running the cotton ginning and pressing factory at Mansa, either by himself or by giving on lease and other allied trades and on such other lines as the partners may desire to take up from time to time." The deed also contained the usual partnership clauses and it is not necessary to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shown below : (i) Shri Ramjidas, s/o. L. Nauharchand 1/4th share (ii) Shri Purshotamdas, s/o. do. 1/4th share (iii) Shri Chananram, s/o. L. Bishanmal 1/12th share (iv) Shri Banarsidas, s/o. do. 1/12th share (v) Shri Baburam, s/o. do. 1/12th share (vi) Shri Rajaram, s/o. L. Reluram 1/20th share (vii) Shri Ramkarandas, s/o. do. 1/20th share (viii) Shri Dwarkadas, s/o. do. 1/20th share (ix) Shri Brij Lal, s/o. do. 1/20th share (x) Shri Roshanlal, s/o. do. 1/20th share (b) All the above ten gentlemen belonged to two families. The first family was known as "Nauharchand Chananram" and the second family as "Bishanmal Reluram". The members of both the families have now partitioned among themselves. (c) These families owned a ginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave enough finances and did not want to risk any further ; and (ii) there were disputes among the five sons of L. Reluram and they did not wish to join the new partnership. (g) In the new partnership, Shri Shadiram, son of L. Gonda Mal, came in as a financing partner and the last six were outsiders who joined as working partners. (h) We have also studied the deed of partnership and it lays down that the partners could either carry on business themselves or they could lease out the factory. 3. (a) On the above facts we think that it cannot be said that the assessee carried on any business. It is no doubt true that 'Nauharchand Chananram Factory' was at one time a commercial asset, but it ceased to be so when it was let out because it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y its order dated the 12th April, 1965, thus, referred the question of law for our opinion. The contention of the learned counsel for the assessees is that there is no legal impediment for the owners of the joint property to enter into a partnership for the purpose of leasing out the partnership property and earning income therefrom. The only argument addressed by the learned counsel for the department was that earning of rental income is not income from business. That may or may not be so. But that is a matter wholly irrelevant for the purpose of determining whether a partnership should or should not be registered under section 26A of the Act. All that has to be seen is whether there is a validly constituted partnership and for that purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring so far as the present controversy is concerned. In fact, that is a case which is more in line with the earlier decision of the Supreme Court already referred to. The next decision which was relied upon by the learned counsel for the department is Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax. This was a decision under section 2(5) of the Excess Profits Tax Act. This decision rests solely on the peculiar definition of "Business" in the Act. The question which we are called upon to determine was not a subject of controversy in this case. It has thus no bearing on the matter before us. The decision which is nearer in point is the one reported as Dal Chand and Sons v. Commissioner of Income-tax. The judgment in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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