BALAJI ENTERPRISES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Bangalore Bench, has referred the following two questions under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee :

(2.) THE assessee is a firm evidenced by a partnership deed. According to the assessee, four different groups had joined together and taken a property on lease and built up a structure on the same and was leasing out to various persons.

(3.) THE Appellate Tribunal set aside the order of the appellate authority and held that the assessee has to be assessed in the status of a registered firm. THE Appellate Tribunal also found that, taking on lease the property, constructing a building thereon and leasing it out to various tenants, is the business activity of the firm and that the rental income cannot be treated as income from property. In that view of the matter, the Tribunal held that the assessee was carrying on an activity which could be regarded as business. It was further found that the taking of the property on lease and thereafter, developing it by putting up a structure and letting it out to various tenants is the business activity of the firm and, accordingly, the assessee has to be treated as a partnership firm for the purpose of assessment of income-tax. Aggrieved by the order of the Tribunal, the assessee filed an application under section 256 of the Income-tax Act which was allowed by the Tribunal and the two questions mentioned above have been referred to us under section 256(1) of the Income-tax Act.