1979 (7) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to registration for the assessment years 1969-70 and 1970-71.
2. Assessment of income derived from letting out articles/furniture provided in Admiralty Flats Motel under the head "Business".

Summary:

Issue 1: Entitlement to Registration for Assessment Years 1969-70 and 1970-71

The court examined whether the assessee was entitled to registration for the assessment years 1969-70 and 1970-71. The key consideration was the validity of the gifts made by P. V. Gajapathi Raju to his wife and two daughters. The Tribunal concluded that the gifts were valid as Gajapathi Raju was the sole surviving coparcener with absolute power of alienation over the properties obtained by him on partition. Consequently, the income was not assessable in the hands of the family, and the firm was granted registration. The court affirmed this view, stating that the partnership was genuine and entitled to registration since the gifts were valid. The Tribunal acted properly in granting registration to the firm, and the first question was answered in the affirmative and in favor of the assessee.

Issue 2: Assessment of Income from Letting Out Articles/Furniture Provided in Admiralty Flats Motel

The second issue concerned whether the income derived by the assessee from letting out articles/furniture in Admiralty Flats Motel should be assessed under the head "Business." The Tribunal had bifurcated the income, assessing the income from buildings under the head "Property" and the income from furniture and other items under the head "Business." The court held that the running of a lodging house was a business activity under the Partnership Act. The classification of income under various heads in the I.T. Act is for administrative convenience and does not affect the determination of whether a group of individuals carries on business as a firm. The court concluded that the letting out of furniture and other articles was incidental to the business of running a lodging house and constituted "business" income. The second question was also answered in the affirmative and in favor of the assessee.

Conclusion:

Both issues were resolved in favor of the assessee. The firm was entitled to registration for the assessment years 1969-70 and 1970-71, and the income from letting out articles/furniture in Admiralty Flats Motel was assessable under the head "Business." The assessee was awarded costs from the revenue, with counsel's fee set at Rs. 500.