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TMI Blog1999 (7) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal Nos. 477 476/90-91/CIT(A)/Jal., dated 7-7-1992 on the following effective grounds:- "1. That on the facts and in the circumstances of the case, the ld. CIT(A) has erred in allowing assessee's appeal by relying on the decision of the CIT(A) passed on No. 478-479/90-91/CIT(A)/Jal., dated 15-11-1991 which has not been accepted by the Department. 2. That it is prayed that the order of ld. CIT(A) be set aside and that of the Assessing Officer be restored." 3. All the grounds are taken up and disposed of together by this common order because the decisions on all those grounds mainly depends upon the decision of the single common issue; whether co-owners sharing profits of any property are partners or not under the Deed of Partnership in the case of the assessee. 4. Stated briefly, the undisputed relevant and material facts for the disposal of the abovestated issue/grounds are as under. 5. Perusal of the combined assessment order for both the years shows that it has been passed under section 144. In this regard notice under section 148 was issued for both the years and returns were filed in the name of M/s. Mohinder Singh Davinder Singh showing nil income. It was also sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700 (SC). In support of the grounds that three groups of persons 'A', 'B' and 'C' had come together and drafted a partnership deed on 10-3-1986 and the same was dissolved on 30-3-1988, so the assessee, as such, had formed a firm and income was assessable in the status of URF. It has further been argued by the learned D.R. that this agreement has been executed with the sole purpose of acquiring property on ownership basis or on lease basis and then renting it out to the prospective lessees and in furtherance of this motive, he constructed an open platform and leased out the same to the FCI w.e.f. 18-10-1986 and as such the platforms constructed were open to sky and this did not constitute house property and partnership deed did specifically mention that the business of the assessee could be acquiring and leasing out the real estate and so in view of the citation Anaikar Traders Estate (P.) Ltd.'s case (supra) it was not assessable as income from house property. He further argued that the case of the assessee was that of carrying on business activity rather than deriving income from house property and as such the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the Department concerned, i.e., FCI to collect the rent from FCI. The plinth block consisting of plinth, office block, toilets, check post and chowkidar accommodation was constructed by the co-owners, who contributed individually for this construction. The so-called firm M/s. Mohinder Singh Davinder Singh only collected the rent from FCI on behalf of the co-owners and distributed the rent so collected among the co-owners. In fact, no business was made by M/s. Mohinder Singh Devinder Singh, as firm. No balance-sheet was prepared and no investment was made by M/s. Mohinder Singh Davinder Singh. Lastly, it is argued that since there was no legal firm constituted and no legal partnership deed was made and no business was conducted, so the partnership deed so executed in the instant case may be only considered as an agreement amongst the co-owners and hence the appeals of the Revenue are liable to be dismissed. 13. In support of his contention, the learned counsel for the assessee has relied upon the ratio of the decision of the ITAT, Ahmedabad Benches in the case of ITO v. Narol Highway Commercial Centre [1985] 21 TTJ (Ahd.) 62 and in the case of CIT v. Phabiomal Sons [1986] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement was executed with F.C.I. on 14-3-1986 for specifying the structure to be made by the co-owners and lastly vide lease deed dated 24-4-1987, the same was let out to F.C.I. on rent. The words 'firm', 'partner' and 'partnership deed' are not defined in the Income-tax Act, 1961 but sub-section (2) of section 2 says they have the same meaning as assigned under the Indian Partnership Act. Section 4 of the Partnership Act defined "partnership" as 'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. It is seen from this definition that partnership involves an agreement to carry on business. The expression "business" is defined under section 2(b) as "including every trade, occupation and profession". In Phabiomal Sons (supra), it has been held by the judges of the Hon'ble Andhra Pradesh High Court that letting out of a building and realising rents therefrom did not amount to carrying on of business. It was incidental to ownership. The expression used in section 4 of the Indian Partnership Act, 1932, are "agreed to share the profits of a business carried on by all or any of them", which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ascertain the real intention of the parties not only from the words in the deed, but also from the entire facts of the case. 19. In the case in hand, M/s. Mohinder Singh Davinder Singh are co-owners of land. They have written partnership deed by the name of M/s. Mohinder Singh Davinder Singh to let out their lands after raising certain structures and plinths over the same in compliance to the agreement with the F.C.I. and after completing the same let out the same, to the F.C.I. by lease deed on rent. It clearly shows that in fact, these co-owners never constituted a legal firm but this partnership deed was simply written for the convenience of the co-owners and that agreement was executed between them so that the co-owners could collect the rent from the F.C.I., and M/s. Mohinder Singh Davinder Singh later on distributed the rent so collected among the co-owners. In these circumstances, the facts which are quite similar to the case of Phabiomal Sons (supra), it has been clearly held by the Hon'ble High Court that letting out of a building and realising rents, by no means, is doing a business. It is incidental to ownership. They further held that the act of letting out a buil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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