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TMI Blog1992 (5) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... te limited company in which the public are not substantially interested. It is the owner of the buildings bearing D. Nos. 17, 18 and 19, East Chitrai St., Madurai. The following six partnership concerns have entered into agreements known as " franchise agreements "with the assessee for the purpose of carrying on business in textiles and garments in the afore-mentioned buildings of the assessee : (a) M/s Hajee Moosa Fabrics (b) M/s Hajee Moosa Silks (c) M/s Fibres and fabrics (d) M/s May Fair (e) M/s Decors (f) M/s Shabnam. Accordingly, they were carrying on business in textiles in the said buildings by virtue of the franchise agreements entered into by them with the assessee. Each of them was paying a commission at the rate of 1 per cent of the net purchase value of the textile goods purchased by them to the assessee on or before the 10th day of each succeeding month till the expiry of the franchise agreements. The said commission was paid by the franchisees to the assessee-franchisor for using the trade emblem of the assessee " Hajee Moosa " and for the other services rendered by the assessee-franchisor to the franchisees in pursuance of the franchise agreements. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2-1990. He gave detailed reasons in his order dated 28-2-1990 relating to the assessment year 1984-85 for allowing the appeal and adopted the same reasons for allowing the remaining appeals relating to the assessment years 1985-86 to 1988-89. The CWT(A) while allowing the appeals after duly considering the terms and conditions of the franchise agreements errered into between the assessee and the franchisees observed as follow : " For all these services, as already stated, the appellant was getting commission of 1 per cent on the purchases made by the franchisees. Therefore, the income earned by the appellant from the franchising business is mainly by way of providing expertise and the building. Therefore, it cannot be said that the buildings in question have not been used by the appellant for the purpose of its business. I would therefore hold that the building provided by the appellant for carrying out the franchising business was used for the business of the appellant itself and therefore it is exempt from wealth-tax under clause (vi) of sub-section (3) of section 40 of the Finance Act, 1983. It would therefore delete the addition. " Aggrieved by the orders of the CWT (A), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehouse, hotel or office for the purposes of its business or as residential accommodation for its employees or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest room or lunch room mainly for the welfare of its employees and the land appurtenant to such building or part : " Thus, a building which is, used by the assessee for the purposes of its business as mentioned in sub-clause (vi) is excluded from the purview of wealth-tax. The main contention of the Revenue is that the assessee itself has not been using the building in question for its business. What is business? It is not defined in the Wealth-tax Act. Section 2(13) of the Income-tax Act defines " business ". " Business " includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. It covers every facet of an occupation carried on by a person with a view to earning profit. Activities of rendering services to others also fall in the four categories of the expression " business ". " Business " in commercial parlance is an activity capable of producing a profit. Ordinarily, the expression " business " connotes a continuous activity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile business carried on by the franchisee. (3) The Franchisee shall purchase, buy or acquire textile/Garments goods dealt in by it only from suppliers, distributors, manufacturers, wholesalers or other sources approved by the company and from no other source or person. (4) The Franchisee shall carry on the textile business in the premises situated at 17, 18 and 19, East Chitrai Street, Madurai, which belong to the company on a leave and licence such space in the said premises as may be necessary for the franchisee to carry on its textile business. No separate rent or other compensation shall be payable by the franchisee to the company in respect of space so provided by the company to the franchisee. (8) The Franchisee shall stock only the textile goods recommended by the company (assessee)........ The Franchisee shall not deal in other textile goods not recommended by the company ........ (9) The company (assessee) shall help, assist and guide the franchisee in buying or acquiring the stocks of textile goods recommended and approved by the company at competitive prices. (10) The company (assessee) shall furnish its guarantee to suppliers or textile goods for credit to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business premises and the goods stocked by the franchisees. Thus, it is not a mere case of the assessee letting out its buildings to third parties on rent for carrying on textile trade. No rent was reserved for the said buildings. The franchisees were merely permitted on leave and licence basis to carry on their textile trade in the said building. The franchisor reserved the right of inspection of the said premises at any reasonable time for inspecting the stocks held by the franchisee. Thus, the assessee-franchisor has been in possession of the buildings in question. The franchisees have been carrying on business in the said buildings on leave and licence basis. Occupation of the buildings by the franchisees as licences is undoubtedly occupation by the assessee itself for its own franchise business. 10. The building in question is a commercial asset, which, its owner -- the assessee has been exploiting for its own business purposes. The income which the assessee earned from the franchisees under the franchise agreements is not a mere property income in the shape of rent for the building. The said income is derived by the assessee for permitting the franchisees to use the assesse ..... 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