1996 (1) TMI 31 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was justified in directing to grant registration to the firm without determining the income belonged to an association of persons or the firm.

Analysis:
The case involved a dispute regarding the status of an assessee who filed its return as a partnership firm and claimed registration under the Income-tax Act. The Income-tax Officer contended that the newly constituted firm was merely a paper transaction and the cinema business was actually run by co-owners jointly. Consequently, the Officer refused to grant registration to the firm. The Tribunal, however, observed that the partnership firm had taken possession of the cinema building and operated the business during the relevant year. Since the firm had filed a return, the Tribunal allowed a protective assessment and directed to grant registration, which could be later canceled if necessary under section 186 of the Act.

The Tribunal's decision was based on the fact that the partnership firm had effectively carried on the cinema business, despite the absence of a lease deed for taking over the cinema. The Tribunal emphasized that the firm's filing of income from the cinema business indicated its operation during the relevant year. As a protective measure, the assessment was made on the partnership firm, leading the Tribunal to conclude that a protective registration could be granted and later revoked under section 186 if required. The Tribunal found that the firm's actions and filings justified treating it as a registered firm for assessment purposes.

In conclusion, the High Court upheld the Tribunal's decision, affirming that the assessment should have been completed in the status of a registered firm. The Court agreed with the Tribunal's reasoning that the partnership firm effectively operated the cinema business during the relevant period, justifying the grant of registration without the need to determine whether the income belonged to an association of persons or the firm. The Court directed the registry to send a copy of the judgment to the Tribunal and take further action under the Income-tax Act, with no order as to costs.