TMI Blog1984 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... as individuals in respect of their shares of the rental income derived from leasing out the assets. Separate assessments were also made on co-owners collectively in the status of association of persons. In appeals, the Appellate Assistant Commissioner cancelled the assessments made in the status of association of persons. On appeal by the Department, the Income-tax Tribunal upheld the order of the Appellate Assistant Commissioner. The co-owners of the assets formed themselves into a partnership under a partnership deed dated July 10, 1969, under the name and style of M/s. Kothuri Ramaiah, Karpurapu Ramakrishna Murthy Others, Co-owners, Guntur. The business of the firm was mentioned in the deed as " leasing out the lands, buildings and machinery ". This firm which came into existence on July 10, 1969, leased out the aforesaid assets to another firm on January II, 1969. The lessor firm applied for registration for the assessment years 1970-71, 1971-72 and 1972-73. It filed returns for these three years in the status of a registered firm disclosing the income under the head " Business ". The Income-tax Officer refused registration on the ground that the concern cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following questions: " (1) Whether, on the facts and in the circumstances of the case, the firm constituted under the partnership deed dated July 10, 1969, is entitled to registration for the assessment years 1970-71, 1971-72 and 1972-73 ? (2) Whether, on the facts and in the circumstances of the case, the firm constituted under the Partnership deed dated April 17, 1972, is entitled to registration for the assessment years 1973-74 and 1974-75 ? (3) Whether, on the facts and in the circumstances of the case, there could be a partnership carrying on the business of leasing out the commercial assets, which could be granted registration under the Income-tax Act, 1961 ? (4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in confirming the orders of the Appellate Assistant Commissioner annulling the assessments made in the status of association of persons as well as on unregistered firm and directing the Income-tax Officer to grant registration to the assessee-firm for the assessment years 1970-71 to 1974-75 ?" All the four questions relate to the same matter, namely, whether the firm is said to be carrying on any bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . " According to Stroud's judicial Dictionary, III edition, page 1957 " Occupation: the term 'occupation' has not any technical meaning. It ordinarily means that which engages time and attention." According to " Words and Phrases Legally Defined ", volume 4, page I 1, second edition, by John B. Sauwers: " Occupation: the business in which a man is usually engaged to the knowledge of his neighbours." Thus, it is seen that the expression " occupation " is of a very wide import. " Occupation " is that which engages the regular attention of person, as a means of making livelihood. With this in mind, let us examine the facts of the present case. In the present case, admittedly, the firm was doing the business of redrying of tobacco with its assets, the plant, machinery, godowns and the factory buildings, which are undoubtedly capital assets. After the dissolution of the firm in 1963, the assets were let out to another firm for doing the same business. There is no doubt that the assessee-firm had abandoned the idea of doing any business by itself. In fact, the Tribunal recorded a finding to that effect and we agree with the said finding. After the dissolution of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease it out and in either case, he carries on the business of earning profits from a commercial asset. The learned judges further observed that the provisions of the Income-tax Act have nothing to do with the validity of a partnership either for the purpose of the Partnership Act or its registration under the Income-tax Act. The same view is reiterated in Capital Foundry Engineering Works v. CIT [1982] 138 ITR 833 (P H). The relevant observations are as follows (headnote) : " That the income derived by an assessee from the lease of the factory premises was business income. The partners were entitled to carry on any other type of business which could be one of leasing the factory premises. The firm carried on business and was, therefore, entitled to registration. " In Ray Talkies v. CIT [1974] 96 ITR 499 (Pat), a Division Bench of the Patna High Court had to consider a question whether the assessee was carrying on any business even after letting out so as to be entitled to renewal of registration. After a review of the various provisions of the lease deed, the court held that the letting out of the factory amounted to exploitation of the commercial assets by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court held that the letting out of a plant and machinery amounted to a business activity. If that be so, this proposition applies with greater force in a case arising under the Partnership Act where the word " business " is of much wider import. The learned counsel for the Revenue, however, placed strong reliance upon Narain Swadeshi Weaving Mills v. CEPT [1954] 26 ITR 765 (SC), in support of his contention, that letting out of plant and machinery cannot be said to be a lease of a commercial asset, but only a lease of movable properties. But we find that this case is not very relevant as the Supreme Court was concerned with a different principle of law altogether. The company in question in that case had purchased only the buildings and leasehold rights from the assessee-firm, but took over from it on lease, at an annual rent, the plant and machinery. The assessee-firm thereafter ceased to manufacture anything and it had accordingly no further trading or commercial activity. On those facts and circumstances, the question was whether the letting out of plant and machinery by the assessee-firm to the company could not be held to fall within the definition of " business " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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