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TMI Blog1970 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration under section 26A of the Income-tax Act ?" The assessee entered into a deed of partnership on the 20th day of April, 1957. In all there were 10 partners. These ten partners emanated from two families known as Nauharchand Chananram and Bishanmal Reluram. The dispute relates to the assessment year 1960-61 and arose on the application of the assessees for the renewal of the registration of the firm under section 26A of the Income-tax Act, hereinafter referred to as the Act. In the deed of partnership, in clause (3), it is clearly stated : "That the business of the firm is and shall be that of running the cotton ginning and pressing factory at Mansa, either by himself or by giving on lease and other allied trades and on such othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Nauharchand-Chananram Mansa (hereinafter called 'the assessee') was constituted under a deed of partnership dated 20th April, 1957. There were 10 partners as shown below : (i) Shri Ramjidas, s/o. L. Nauharchand 1/4th share (ii) Shri Purshotamdas, s/o. do. 1/4th share (iii) Shri Chananram, s/o. L. Bishanmal 1/12th share (iv) Shri Banarsidas, s/o. do. 1/12th share (v) Shri Baburam, s/o. do. 1/12th share (vi) Shri Rajaram, s/o. L. Reluram 1/20th share (vii) Shri Ramkarandas, s/o. do. 1/20th share (viii) Shri Dwarkadas, s/o. do. 1/20th share (ix) Shri Brij Lal, s/o. do. 1/20th share (x) Shri Roshanlal, s/o. do. 1/20th share (b) All the above ten gentlemen belonged to two families. The first family was known as "Nauharc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other four did not. (f) On a question from us the learned counsel for the assessee stated that the assessee did not carry on the business for two reasons : (i) the partners did not have enough finances and did not want to risk any further ; and (ii) there were disputes among the five sons of L. Reluram and they did not wish to join the new partnership. (g) In the new partnership, Shri Shadiram, son of L. Gonda Mal, came in as a financing partner and the last six were outsiders who joined as working partners. (h) We have also studied the deed of partnership and it lays down that the partners could either carry on business themselves or they could lease out the factory. 3. (a) On the above facts we think that it cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of a valid partnership, viz., 'carrying on of business' is not fulfilled. The assessees were dissatisfied with this order and moved the Tribunal under section 66(1) of the Act. The Tribunal by its order dated the 12th April, 1965, thus, referred the question of law for our opinion. The contention of the learned counsel for the assessees is that there is no legal impediment for the owners of the joint property to enter into a partnership for the purpose of leasing out the partnership property and earning income therefrom. The only argument addressed by the learned counsel for the department was that earning of rental income is not income from business. That may or may not be so. But that is a matter wholly irrelevant for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership Act or its registration under section 26A of the Income-tax Act. The learned counsel then relied upon Tripurasundari Cotton Press Co. Ltd. v. Commissioner of Income-tax. This case has no bearing so far as the present controversy is concerned. In fact, that is a case which is more in line with the earlier decision of the Supreme Court already referred to. The next decision which was relied upon by the learned counsel for the department is Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax. This was a decision under section 2(5) of the Excess Profits Tax Act. This decision rests solely on the peculiar definition of "Business" in the Act. The question which we are called upon to determine was not a subject of controver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income from business and assessable under section 10 of the Income-tax Act." This decision clearly indicates that there can be a partnership to carry on business of leasing property or commercial assets. As regards rental income, the question whether such income is assessable under section 10 or section 12 of the Act is a matter which, as already pointed out, we are not called upon to pronounce and in any case that is a matter which has to be determined on the facts and in the circumstances of each individual case. For the reasons recorded above we return the answer to the question referred for our opinion in the affirmative. The assessees will have their costs which are assessed at Rs. 200. BAL RAJ TULI J. - I agree. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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