TMI Blog1984 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... t treating the assessee as a body of individuals. The Income-tax Officer took the view that no business is carried on by the firm and letting out a building and collecting rents do not amount to carrying on of any business. He also held that the building is not a commercial asset. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On a further appeal by the assessee, the Tribunal disagreed with the view of the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal held that " business " is a term of wide import and anything which is in occupation requiring attention amounts to " business " and since letting out a building involves keeping the property in good repair and paying taxes regularly, there is a continuous and organised activity amounting to " business ". The Tribunal directed the Income-tax Officer to grant registration. Hence, this reference by the Revenue. It is submitted by Mr. M. Suryanarayana Murthy, the learned standing counsel for the Income-tax Department, that the view of the Tribunal is erroneous and unsustainable. On the other hand, Mr. Ch. Sreerama Rao, the learned counsel for the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar question arose. The father, Sunderlal, his wife and two sons entered into an agreement of partnership. The deed mentioned that income derived from certain properties and leases shall be divided by the partners in equal shares. The work pertaining to courts, offices, recovery of rents, etc., was agreed to be done by the father, Sunderlal, with the consent of the other partners. The firm applied for registration which was refused by the Income-tax Officer who assessed the assessee as an association of persons. On a reference, the Bombay High Court held as follows (p. 469) : " If two joint-owners of a house agree that one of them should have the general management and provide funds for the necessary repairs so as to render the property fit for the habitation of tenants and agree to divide the net rent between them, it cannot be said that they are carrying on business or that they have become partners. " We are in complete agreement with this view of the Bombay High Court. The learned counsel for the assessee, however, referred to some decisions as supporting the proposition canvassed by him. In Narasingha Kar Co. v. CIT [1978] 113 ITR 712 (Orissa), one N entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case has to be looked at from the businessman's point of view to find out whether letting, was for doing of a business or exploitation of the property by owner. This decision speaks of a general principle that in considering the question whether letting amounts to business, each case has to be decided on the facts of that case. In S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 (SC), the facts were that the assessee took on lease a market place for a term of 50 years undertaking to spend Rs. 5 lakhs for remodelling and repairing the structures on the site. It was also given the right to sub-let different portions. The question was whether the assessee's activity amounted to business. It was held that " business " would embrace in itself dealing in real property as also the activity of taking a property on lease, setting up a market thereon and letting out the shops and stalls in the market. The taking of the property on lease and sub-letting portions thereof was held to be a part of business and trading activity of the appellant. We fail to see how this case renders any assistance to the assessee. This was not a case of enjoyment of the property by an owner by givi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned judges by way of an illustration. The case before them was not a case of owners of a building forming into a partnership for letting it out. Even if the Allahabad High Court decided in that manner, with respect, we do not agree with this view. In CIT v. Admiralty Flats Motel [1982] 133 ITR 895 (Mad), one G, who obtained properties in a partition gifted to his wife and daughters the land which he obtained on partition and made some constructions on, the land. G and his wife entered into a partnership for carrying on business as lodging house-keepers along with the two daughters. The Income-tax Officer refused registration among other grounds that the income derived by the firm by letting out flats is an income from property and there was no business with reference to which there could be a firm. The question was whether this view of the Income-tax Officer was right. On the facts, the court held that the intention of the parties was to run a business of lodging house-keepers, that the letting out of furniture and other articles bad been conceived by the firm as a substantive, systematic and organised course of activity and that it was linked with and incidental to the carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. No costs. Before parting with the case, we would like to mention one thing which we noticed while going through the papers. Obviously, the assessee declared in the returns filed for the assessment years 1975-76 and 1976-77, income derived from letting out of the properties, as if it was income derived from " business " assessable under section 28 of the Act. The Income-tax Officer completed the assessments adding a few inadmissible expenses to the income returned. In the first place, there is no indication in the assessment orders that the income was computed under the head Income from property " under section 22 of the Act. Necessary statutory deductions in the computation of income under the head " Property " have not been given, for example, the deduction on account of repairs, municipal taxes, etc. Consistent with the finding that the assessee was deriving income from property, the Income-tax Officer ought to have computed the income under the head " Property " in accordance with the provisions contained in sections 22 to 26 of the Act. What is more, the Income-tax Officer does not seem to have considered the application of section 26 of the Act, which deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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