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TMI Blog1986 (8) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... struct godowns according to the specifications of FCI and give to on lease to them. The specifications were regarding the capacity of the godowns and construction of approach roads. FCI has also given specifications regarding the strength of the walls, flooring, doors and roofing. 2. On 20-1-1977 a deed of partnership was drawn up between Rami Reddy and his three sons and three ladies who are his close relatives. According to this partnership deed Shri Rami Reddy had entered into the agreement with FCI on behalf of himself and his sons for construction of godowns and lease them out to FCI for at least 5 years. The preamble narrates that the first four parties were member of HUF and there was an oral partition by which their agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979-80 to 1982-83 also be treated the assessee as an unregistered firm. 5. The assessee appealed. The appeals for the asst. years 1978-79 to 1980-81 were heard by the Commissioner (Appeals) Sri Govinda Rajan together. He straightaway condoned the delay of 4 years in filing the application for registration and accepted the explanation given by the assessee. On the basis of a certificate given by the Bank, he accepted the assessee's submission that the original partnership deed was in the custody of the Bank. Thus, non-availability of the partnership deed amounted to a reasonable cause for the delay in filing the application. With regard to the question whether the assessee was carrying on business or not, he held that merely because the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 206. In these two cases, the High Courts have held that letting out of property would not constitute a business and therefore the agreement entered into by the parties would not give rise a firm entitling it to registration. The appeal was dismissed. 6. Thus, we have before us the departmental appeals for asst. years 1978-79 to 1981-82 and the assessee is in appeal for the asst. year 1982-83. The issue however is whether the activity of the assessee could be considered as business for the purpose of Partnership Act and therefore they could be treated as a registered firm. Sri Ranga Rao, learned counsel for the assessee had submitted that the assessee's activity was not merely letting out of property. They were bound by an agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad stopped doing business. 7. Sri Santhanam for the department submitted that the activities of the assessee had been considered by the Tribunal while disposing of the appeal regarding the head of income under which the rent receipts are to be assessed. In that order which is reported in K. Rami Reddy Sons v. ITO [1985] 14 ITD 108 (Hyd.), the Tribunal has held that the assessee was merely letting out properties only. In this case, he submitted there were a group of persons who had come together to get an assured income of rent. No other services were rendered to FCI other than the letting out the premises. On these facts, he submitted that the principle laid down by the Andhra Pradesh High Court in the case of Phabiomal Sons would cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This normally goes with letting out of property and there is nothing special about it. 9. So the only point to be considered is whether the assessee had first to construct godowns according to the specifications of the FCI and then let out to them, it makes any difference ? In our opinion, it makes no difference. The property may either be owned by the assessee or constructed by them. The fact that the property was constructed to conform to the specifications of FCI does not make any difference. The property constructed belongs to the assessee only. They are the owners. It only means that the construction have been made to suit the convenience of the tenant. Nothing more can be read into it. Therefore, we are unable to find any activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in 158 ITR, they pointed out that the activity of the assessee involved outlay of capital, attention and all appropriate which go with the concept of business. It was therefore held to be a business undertaking. In the case before us, there was no such activity. After the construction was over, the only activity of the partners are to sit back and realise the rentals. 11. In the case of Raja Rajeswari Warehousing Complex reliance has been placed in the earlier decision of the Tribunal which has already been considered. They have to also relied on the Madras High Court in the case of Admiralty Flats Motel. They had straightaway accepted that there was such an activity in this case also; but the Andhra Pradesh High Court in Phabioma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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