COMMISSIONER OF INCOME TAX HYDERABAD Vs. VENKATESWARA TALKIES

JUDGEMENT

(1.) The following questions of law are referred to this court by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961. "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that a common appeal could validly be filed by the assessee against the Income-tax Officers separate order on registration and assessment ? 2. Whether, on the facts and in the circumstances of the case, the assessee did any business during the period relevant to the assessment year 1969-70 ? 3. Whether, on the facts and in the circumstances of the case, the assessee was entitled to registration under section 185 of the Income-tax Act, 1961 ?"

(2.) For the assessment year 1969-70, the assessee filed a return declaring the income derived by it from the lease of a cinema theatre known as "Venkateswara Talkies". The assessee claimed that it is a partnership firm evidenced by a deed of partnership entitled to registration under s. 185 of the I.T. Act, 1961. The ITO rejected the claim for registration on the ground that the income derived by the assessee-firm from the lease of the cinema theatre was income under the head "Other sources" inasmuch as the assessee could not be considered to be carrying on any business while the theatre was leased out. In the view that the assessee had not been carrying on any business, the claim for registration was rejected and the assessment was made in the status of an "association of persons". It also appears that in the assessment a sum of Rs. 7,400 was added while computing the total income. The order refusing registration as well as the computation of total income were part of one common order passed by the ITO. The question regarding registration was dealt with by the ITO under the head "Status" and the computation of total income was dealt with under the head "Other sources" and the order was shown to have been passed under s. 143(3) of the I.T. Act. Against the assessment as well as the refusal to register the partnership firm, an appeal was filed before the AAC, who confirmed the order of the ITO and dismissed the appeals. The assessee carried the matter in second appeal to the Tribunal. Before the Tribunal, the assessee gave up the question regarding the addition of Rs. 7,400 made in the computation of total income and pursued its appeal only in connection with the refusal to grant registration to the partnership firm. The Tribunal found that the assessee-firm had been carrying on business in the exhibition of films till April, 1969, and the lease of the cinema theatre till August, 1971, did not indicate that the assessee abandoned the idea of carrying on business. On these facts, the Tribunal came to the conclusion that the asset, namely, the cinema theatre, continued to be a commercial asset producing income assessable under the head "Business". In that view of the matter, the Tribunal accepted the assessees contention that the income derived by the lease of the cinema theatre is assessable under the head "Business" under s. 28 of the I.T. Act. Once the question regarding the assess ability of the income under the head "Business" is resolved in favour of the assessee, objection regarding the grant of registration did not survive, because the ITO refused to grant registration to the firm on the ground that it has not been carrying on any business. In the view taken by the Tribunal that the assessee-firm must be considered to be carrying on business, the claim for registration of the partnership firm was allowed. Aggrieved by the order of the Tribunal, the Commissioner asked for and obtained a reference under s. 256(1) and the three questions mentioned above are referred by the Tribunal.

(3.) up the first question referred, we find no error in the assessee filing one single appeal against a common order. It is not in dispute that the ITO has himself passed one single order purporting to be under s. 143(3). The assessee accordingly filed an appeal against that order taking objection to the computation of total income as well as the refusal to grant registration. It is, however, not necessary to consider this question in any detail because when the matter finally reached the Tribunal, the assessee gave up his contention regarding the addition of Rs. 7,400 to the income returned and pursued his appeal only in regard to the refusal to grant registration to the assessee-firm. The Tribunal was, therefore, right in holding that there was only one appeal filed by the assessee and that appeal was against the refusal to grant registration. We are unable to accept the Revenues contention that the assessee was not entitled to urge the ground relating to refusal of registration in the appeal filed before the Tribunal after withdrawing the contention regarding the addition of Rs. 7,400. We accordingly answer the first question referred to us in the affirmative, that is, in favour of the assessee and against the Department.