COMMISSIONER OF INCOME TAX Vs. PHABIOMAL AND SONS

JUDGEMENT

(1.) THE question referred for our decision is :

(2.) AN interesting question indeed. Phabiomal Mulchand Mirpuri and, is three sons, Jiwatram, Gopichand and Bhagchand, who own a building in common entered into an agreement of partnership to let out the building and share the rents. The deed of partnership executed on May 1, 1974, recites that the firm's business shall be realising rents from letting out the building. The firm applied for registration under section 185(1)(b) of the Income-tax Act, 1961, for the assessment year 1975-76 and for continuation of the benefit of registration for the year 1976-77. By order dated October 14, 1976, the Income-tax Officer refused registration and made the assessment treating the assessee as a body of individuals. The Income-tax Officer took the view that no business is carried on by the firm and letting out a building and collecting rents do not amount to carrying on of any business. He also held that the building is not a commercial asset. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On a further appeal by the assessee, the Tribunal disagreed with the view of the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal held that "business" is a term of wide import and anything which is in occupation requiring attention amounts to "business" and since letting out a building involves keeping the property in good repair and paying taxes regularly, there is a continuous and organised activity amounting to "business". The Tribunal directed the Income-tax Officer to grant registration. Hence, this reference by the Revenue.

(3.) TO resolve the controversy, it is necessary to refer to section 185 (1) of the Income-tax Act, 1961, which pertains to registration of firms.