TMI Blog1979 (7) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 65, he gifted Rs. 25,000 to each of his two daughters. On April 25, 1966, he gifted a like amount to, each of his two daughters. On December 31, 1969, he executed a settlement deed under which he gifted to his wife and his two daughters immovable properties worth Rs. 50,000 each and also cash of Rs. 1,13,000 each. There were further gifts to his wife and two daughters on March 30, 1968, of Rs. 1,50,000 each. Again on February 23, 1969, similar amounts were gifted by him to each of them. Certain constructions were put up on the properties belonging to them including the gifted properties and the monies gifted to the wife and two daughters were utilised in such constructions. The buildings are known as " Admiralty Flats Motel ". On January 1, 1968, Gajapathi Raju and his wife entered into a partnership for the purpose of carrying on the business of " Lodging house-keepers" and executed a deed therefor on January 30, 1968. The two minor daughters were admitted to the benefits of the partnership with 25% share each. In the event of loss, the same had to be borne by the two adult partners. The partnership was for a period of five years with effect from January 1, 1968, and it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal's view was that the income was assessable under the head " Business " The result was that the firm was granted registration and it was 'directed to be assessed with reference to the income from " property and "business " in the manner mentioned above. The revenue, aggrieved by this order of the Tribunal, has brought up the matter on reference with reference to the two questions extracted already. The first question may now be taken up for consideration. With reference to this question, the matter has to be considered only in the light of the validity of the gifts effected by Gajapathi Raju. If the gifts are valid then there is no dispute that the firm is a genuine one which is entitled to registration. As regards the validity of the gifts, the Tribunal has proceeded on the basis that Gajapathi Raju was the sole surviving coparcener and that as such he was in a position to alienate the properties obtained by him on partition as if they were his separate properties. There is distinction between a case where a coparcenary is reduced to a single coparcener by the other coparceners leaving the family as such either by death or otherwise and a coparcenary which has onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned. Mr. Jayaraman, learned counsel for the revenue, submitted that in view of the finding of the Tribunal that the income from the buildings was assessable under the head " Property ", in the present case, it would follow that there was no business as such. His further submission was that the income from letting out the furniture, etc., would only come under "Other sources " and that as there was no business income left, there could be no firm in existence which could be granted registration. We are unable to accept this submission. The I.T. Act divides income under separate heads for the purpose of enabling assessment being made after giving the particular deduction available under the respective provisions. The classification of various heads of income under the I.T. Act is only for the purpose of convenience of administration of that statute. The concept of business as envisaged under the I.T. Act cannot be imported into the determination of the question as to whether a group of individuals do, by agreement, carry on business as a firm. Under s. 2(23) of the I.T. Act, the expressions " firm partner " and it partnership" have the meanings respectively assigned to them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act and not necessarily as business income. Therefore, the fact that the income from this business in the sense of the Partnership Act has been bifurcated and brought to tax under two heads, namely, " Property " and " Business ", cannot in any manner affect the question of jurisdiction. The result is, the Tribunal has acted properly in granting registration to the firm. The first question, therefore, has to be and is answered in the affirmative and in favour of the assessee. As far as the second question is concerned, it is limited to the assessment of income from letting out articles/furniture provided in the Admirality Flats Motel. The learned counsel for the revenue pointed out that in view of the finding of the Tribunal that there was no composite letting out of the building with furniture, the letting out of the furniture and other articles could be income assessable only under the head " Other sources ". His point was that the amount was invested on the articles and furniture and the income derived as a result of the articles or furniture being let out would constitute realisation of income from investments and not business activity. Here also, in view of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the assessee being company. In East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC), the assessee was incorporated as a company with the objects of buying and developing landed properties. It purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was, whether the income realised from the tenants of the shops and stalls was liable to be taxed as " Business income " or as " Income from property ". The Supreme Court held that the income was liable to be assessed under the head " Income from property " and it was pointed out that the character of the income was not altered because it was received by company formed with the object of developing and setting up markets. This case was decided on the footing that the income from property owned by a company need not be assessed under the head " Business ". It did not purport to decide that even in a case where a particular asset was utilised as a business asset, the income therefrom could not be assessed under the head " Business ". In Sultan Brothers P. Ltd. v. CIT [1964] 51 ITR 353 (SC), a private company constructed a building, fitted it up with furniture an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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