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TMI Blog1999 (3) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... red into not for doing business but only to facilitate transfer of the house property held by the firm formed under the deed of partnership dated June 8, 1979, to the limited company with a view to avoid payment of capital gains tax, the assessee is not entitled to registration under section 185(1)(a) of the Income-tax Act, 1961, for the assessment year 1981-82 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal should have observed that the so called new firm which came into existence on April 1, 1980, had not carried on any business either during the year of account or in the subsequent accounting year and hence it cannot be said that there was 'lull' in the business only in the accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 11, 1980, i.e., shortly after the accounting year was over and the entire business was taken over by the private limited company and the erstwhile partners were given equity shares. Thereafter, the private limited company continued to carry on the same business. During the assessment year in question, admittedly, the firm did not carry on the business excepting letting out the building owned by the firm for rent. The assessing authority refused the registration for the assessment year 1981-82 on the ground that no business was carried on during the year and that the object of entering into partnership with the private limited company and reconstituting the firm was only to enable the assets to be transferred from one entity to another. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te authority's order is described as perverse. The following facts are noted by the appellate authority : (1) The assessee-firm carried on business in cotton in the preceding year ; (2) During the previous year relevant to the assessment year 1981-82, the firm derived the income only from letting out the immovable property. (3) There was only a change in the constitution of the firm and the same firm which had previously five partners, continued the business with an additional partner... (5) The line of business mentioned in the partnership deed dated April 1, 1980, was the same as that carried on earlier. It was nowhere mentioned that the partnership business should be handed over to the private limited company during the relevant ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of learned standing counsel that the factum of not carrying on business during the relevant year must be viewed in the context of the decision of the partners to make over the assets and liabilities and the going business to the private limited company. But, the fact that the business was in fact not carried on is not conclusive, nor the fact that the dissolution did take place in the next year, is conclusive. On an overall view of the matter, we hold that the conclusion reached by the Appellate Commissioner and the Tribunal is essentially a finding of fact backed up by some basis. It is not, therefore, possible to upset that finding. The induction of a new partner with the object of ultimate transfer of assets, etc., to anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to entitle the firm for registration. The next decision relied upon by learned standing counsel for the Department is CIT v. Kuya and Khas Kuya Colliery Co. [1985] 156 ITR 206 (Patna). In that case, it was observed that the firm can be registered only if there is an existing partnership and if the firm is not carrying on business, it cannot be a partnership. Here again, we must point out that those observations were made in the context of facts of that case. The assessee-firm which was a firm having the object of mining coal, leased out the colliery and as per the agreement, the entire business was to be controlled by the lessee. The transaction did not involve the lease of commercial assets only, but it was a lease of the entire business. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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