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TMI Blog1997 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and built up a structure on the same and was leasing out to various persons. Originally, the assessee had claimed before the Income-tax Officer the status of a registered firm and the return of the income was filed accordingly. The firm had only income from the property. Thereafter, the assessee filed a revised return, in which the status was shown as association of persons. According to the assessee, four different groups had joined together and taken a property on lease and built up a structure on the same. The income of the property has to be shared by these four groups in different proportions and, therefore, they are liable to be assessed as per the provision contained in section 26 of the Income-tax Act, viz., as co-owners. The assessing authority did not accept the contention of the assessee and treated the firm as a registered firm and made the assessment accordingly. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), who took the view that the assessee was liable to pay tax in the status of association of persons as its only source of income was from house property and the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1972] 83 ITR 700. In the above case, the assessee was a company and the company, whose object inter alia was to take on lease or otherwise 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. The assessee-company took on lease a property and undertook to spend Rs. 5 lakhs for the purpose of remodelling and repairing the structure on the site and the assessee was also given a right to sublet the different portions. The appellant, during the period in question, developed the property and let out the portions of the same as shops, stalls and ground space. The question that arose for their Lordships of the Supreme Court was as to whether the income would come under section 10 of the Indian Income-tax Act, 1922, corresponding to section 28 of the Income-tax Act, 1961, or whether it would come under section 12 of the Indian Income-tax Act, 1922, viz., income from other sources corresponding to section 56 of the 1961 Act. In answering that question, their Lordships held that the assessee not being the owner of the property, the income has to be taken as one coming under section 10 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further question as to whether the carrying on of the said activity was the object of the incorporation of the company as given in the memorandum of association would also have some relevance. " It was further observed : "Ownership of property and leasing it out may be done as a part of business, or it may be done as landowner. 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. From the aforesaid decision of the Supreme Court it is clear that if a person receives rental income by leasing out the property as its owner, then the income may come under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lex and lease them out. The assessee has received the income as part of their business activity and there cannot be any doubt that the leasing out of the commercial complex made by the assessee-firm is part of its business and it amounts to business activities. The case decided by the Supreme Court in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49, cannot have any application to the facts of this case, for, it was found that the company received the rental income as owner of the property and, accordingly, it would fall within section 9 of the Indian Income-tax Act, 1922. Learned counsel for the assessee placed reliance on a decision of this court in D. R. Puttanna Sons Pvt. Ltd. v. CIT [1986] 162 ITR 468 to contend for the position that the income from the rent, in such circumstances, cannot be considered as income from business. That decision also cannot have any application to the facts of this case. In that case, it was clearly found by this court that the assessee remained as owner of the building for a period of 30 years. The decision has proceeded on the basis that the assessee is the owner of the building. That is not the case here. In these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges." Again, in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 (SC), their Lordships observed as follows : " During the subsistence of the partnership, the value of the interest of each partner qua that asset cannot be isolated or carved out from the value of the partner's interest in the totality of the partnership assets. And in regard to the latter, the value will be represented by his share in the net assets on the dissolution of the firm or upon the partner's retirement." From the above pronouncements of the Supreme Court, it is absolutely clear that no partner has a definite or ascertainable share in the partnership properties or eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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