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TMI Blog1976 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a set back and a number of concerns which had been carrying on business of storing, packing, pressing and exporting raw jute had to be closed down. Consequently, a number of godowns belonging to the said concerns fell into disuse. Budhmal earned profits by taking lease of such godowns and sub-letting the same to various parties for storage of goods and commodities. It is recited in the deed that Budhmal had to remain out of Calcutta for long periods due to his indifferent health. Being desirous of extending his business by opening new lines, namely, dealings in jute, hessian, textiles and other similar commodities and with this object Budhmal constituted the partnership with Nirmal Kumar and the partnership took over the earlier activities of Budhmal, namely, letting out of the leased godowns. The deed of partnership has not been challenged nor has it been found to be a sham document. For the assessment year 1960-61, the Income-tax Officer refused the application of the assessee for registration on the ground that the assessee was merely deriving income from letting out properties. He found that the assessee was constituted of persons owning in common , large properties pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely necessary to enable the assessee to make the most of the godowns earn profits. The above two circumstances, we think, entitle the assessee to say that the activities do amount to the carrying on of a business." The question which has been referred from the order of the Tribunal is as follows : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the activities of the assessee constituted a business so that the assessee had been validly constituted as a partnership ? " Mr. B. L. Pal, learned counsel for the revenue, submitted that in the facts and circumstances as found the only conclusion which can be drawn is that the assessee consisting of the two persons do nothing but manage their existing property. He relied on section 4 of the Indian Partnership Act which defined a partnership as the relation between persons who have agreed to share the profits of a business. Section 2(b) of the same Act defined "business" to include every trade, occupation and profession. He submitted that the concept of occupation by itself did not conclude the matter in view of Explanation 1 of section 6 of the Act, namely, that the sharing of profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 966] 59 ITR 457 (Cal). The facts in that case were that under an agreement two persons became entitled to receive from a limited company a commission at the rate of 1 per cent. of the company's sales in perpetuity because of past services rendered in procuring a loan of Rs. 10,00,000. The benefits of this agreement were transferred in favour of two other persons by a deed of assignment. Thereafter, the assignees by an instrument entered into a partnership to share the common receipts. On such facts it was held that a mere common interest or sharing of profits will not by itself constitute a partnership. The partners must also carry on a common business. It was held that carrying on of business would mean that there should be some contribution by the partners to the growth or enjoyment of business and with this end in view the partners should be pursuing the business and such pursuit should be apparent from their conduct. It was found that there was no volition or activity, on the part of the partners and it was held that mere watching the earnings did not amount to carrying on of a business. Mr. R. N. Bajoria, learned counsel appearing on behalf of the assessee, contended, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conclude that the activities carried on by the assessee were business activities. Mr. Bajoria in support of his contentions has relied on two decisions--one of the Supreme Court and the other of this court. The decision of the Supreme Court is in the case of Karanpura Development Co. Ltd. v. Commissioner of Income-tax [1962] 44 ITR 362 (SC). The facts before the Supreme Court were that the assessee was a company which was formed with the objects, inter alia, of acquiring and disposing of underground coal mining rights in certain coalfields. The company carried on business activities in acquiring coal mine leases over large areas, developing them as coalfields and then sub-leasing them to collieries and other companies. The company never worked the coalfields itself, nor did it acquire or deal with the coal raised by its sub-lessees. The question which was mooted before the Supreme Court was whether the amounts received by the company as salami for granting the sub-leases constituted trading receipts in its hands. It was held by the Supreme Court that the transactions of acquiring leases and granting sub-leases were in the nature of trading within the objects of the company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Where a company acquires properties which it sells or leases out with a view to acquiring other properties to be dealt with in the same manner, the company is not treating them as properties to be enjoyed in the shape of rents which they yield but as a kind of circulating capital leading to profits of business, which profits may be either enjoyed or put back into the business to acquire more properties for further profitable exploitation." This decision has been followed in the subsequent decision of this court in the case of Commissioner of Income-tax v. Ukhara Estates Zamindaries (P.) Ltd. [1971] 82 ITR 103 (Cal). It appears to us that the law, on the point at issue, i.e., the English law, the Indian statute and the exposition thereof by the Supreme Court is well settled and clear. We note in particular that the facts in Karanpura Development Co. Ltd.'s case [1962] 44 ITR 362 (SC) before the Supreme Court are more or less similar to the facts before us in the instant case. For the reasons mentioned above we answer the question in favour of the assessee and in the affirmative. There will be no order as to costs. DEB J.--I agree. - - TaxTMI - TMITax - Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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