1984 (9) TMI 78

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..... d Firm (URF) derives income from letting out of godowns. The ITO observed that the assessee's activity of letting out of godowns did not constitute a business activity. He, therefore, called upon the assessee as to why the said income should not be assessed as income from house property. The assessee initially contended that his activity should be treated as a business activity following the decision which were placed before ITO as set out in para 2 of his order. The ITO held that the facts of the said cases were different and, therefore, those decisions have no application. He therefore, proceeded to assess the said income under the head income from house property, for both the years under appeal and also declined to grant registration to .....

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..... the firm and not by the partners and the income, therefore, therefore was assessable in the hands of the firm and not in the hands of the firm and not in the hands of the co-owners as held by the CIT (A)/AAC. Relying on the decision in case of Sarvamangala Properties Ltd. vs. CIT (1973) 90 ITR 267 9CAl) the ld. departmental representative submitted that when a firm owned a house property income therefrom was assessable in the hands of the firm and not in the hands of the partner individual. He thus supported the order of the ITO for the respective years. Shri Kaji the ld. counsel for the assessee on the order hand pointed out that the decision reached by the CIT (A)/AAC did not call for any interference because in the instant case the ITO h .....

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..... lement or the essential requisite of partnership viz. carrying on a business is not satisfied then there is not question of firm coming into existence. In this view of the matter the ITO was not justified at all in treating the assessee as URF but the correct status is the AOP which comprised of various co-owners who had agreed to share the income realised by letting out of godowns. The shares of the co-owners would be the same as set out in the deed of partnership. In other words the deed of partnership in absence of business activity carried on by the firm would merely operate as an agreement under which the co- owners would share the income in specified portions as stated therein. Thus in the instant case the shares of the co-owners are .....

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