9911796707
TMI Blog1999 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... s rightly allowed by the Income-tax Officer and in that view cancelling the order of the Commissioner of Income-tax under section 263 ?" We have heard Sri Prakash Krishna, learned standing counsel for the Commissioner, and Sri Shambhu Chopra learned counsel for the assessee-respondent. The respondent claimed to be a partnership firm constituted under a deed dated June 18, 1974. The firm was constituted by four persons named below : 1. Ratan Kumar, 2. Lav Kumar, 3. Rewati Raman, 4. Madan Mohan. They constructed a cinema hall named jai Bharat Theatre at Lucknow, and furnished it with furniture, machinery, equipment, etc. By an agreement dated November 1, 1975, the theatre was leased out to a partnership firm, Jai Santoshi Maa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership Act to mean "the relationship of persons who have agreed to share the profits of a business carried on by all or any of them acting for all". The word "business" has also been defined to include every trade, occupation and profession. Therefore, the question is whether the activity of construction of a cinema hall and letting it out to another person for actual operation is a business, i.e., a trade, occupation and profession. A similar question came for discussion before the Supreme Court in Sultan Brothers Pvt. Ltd. v. CIT [1964] 51 ITR 353. In that case, the assessee, Sultan Brothers, had constructed a building fitted it up with furniture and fixtures and let it out on lease fully equipped and furnished for the purpose of runni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 700 (SC), the appellant-company was incorporated for taking over on lease or otherwise to acquire and to hold, improve, lease or otherwise dispose of land, houses and other real and personal property and to deal with the same commercially. Since after the incorporation of the company it took on lease a market place for an initial term of 50 years, undertaking to spend Rs. 5 lakhs for the purpose of remodelling and repairing the structure on the site. It was also given the right to sublet the different portions. The activity of the company during the assessment years 1956-57 to 1958-59 consisted of developing the property and letting out portions thereof as shops, stalls and ground spaces to shopkeepers, stallholders and daily casual ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done as land owner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. It is not that no company can own property and enjoy it as property, whether by itself or by giving the use of it to another on rent. Where this happens, the appropriate head to apply is 'income from property' (section 9), even though the company may be doing extensive business otherwise. But a company formed with the specific object of acquiring properties not with the view to leasing them as property but to selling them or turning them to account even by way of leasing them out as an integral part of its business, cannot be said to treat them as landowner but as trader." On behalf of the respondent, reliance is pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 85 (Mys) though a partnership deed was executed no business was set up during the accounting period. The Mysore High Court held that the firm was not entitled to registration. Joshi and Varma v. CIT [1979] 119 ITR 262 (Bom) is a converse case in which it was held that after the business ceased the firm cannot be said to carry on business in the subsequent year merely because it was selling materials left over and settling bills. In that case the assessee-firm was specifically formed for the purpose of executing a contract for the construction of an aqueduct across a river. The construction was completed in March/April, 1961. The assessee's accounting year ended on March 31, 1962, relevant to the assessment year 1962-63. In the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the picture. The lease was for an initial period of three years. The lessee was to carry out all outside and inside repairs. Thus the lease deed shows that it was a case of letting out an asset and using the same as property and there was no element of business, trade or occupation in that activity. The Tribunal has observed that the overall control on the running of the business and of ensuring that the business is being run in conformity with the terms of the licence and in case of failure of the agreement to enter upon the premises and to run the business had been retained by the firm. We have referred to the terms of the lease deed and we find nothing in the terms thereof which may support the Tribunal's observation that jai Bharat T ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
