COMMISSIONER OF INCOME TAX Vs. GANESH TALKIES

JUDGEMENT

(1.) ON the application of the Commissioner of Income-tax, Jodhpur, the Income-tax Appellate Tribunal has referred the following" question of law to this court :

(2.) THE statement of the case submitted by the Tribunal in brief is that the assessee in this case filed its return as a partnership firm and claimed registration under Section 185 of the Income-tax Act, hereinafter referred to as "the Act". THE Income-tax Officer was, however, of the opinion that the firm having the same name as the assessee created by the partnership deed on April 30, 1978, was to continue till March 31, 1979, only. THEreafter, the co-owners of the cinema business continued to run the same during the relevant accounting year. THE present partnership constituted by deed dated December 15, 1979, purported to have taken over the lease of the cinema hall including plant and machinery from the co-owners. No lease deed had been executed evidencing the agreement by the co-owners, In fact, there was a dispute between the co-owners and the cinema remained closed for some time during the accounting year. On December 15, 1979, seven partners of the firm had forcibly taken possession of the cinema building and started running the same. According to the Income-tax Officer, the newly constituted firm was only a paper transaction and the business of the cinema was actually run by the co-owners jointly. He, therefore, took the status of the assessee to be that of an association of persons as a whole and refused to grant registration to the firm as applied for. THE assessee carried the matter in second appeal before the Income-tax Appellate Tribunal, which was of the opinion that the Department could determine as to who was the rightful owner of the property. Since the Department had concluded that the assessee was not the owner of the property nor had it carried on the business, no assessment could be made on the assessee as such. However, an assessment had been made on the assessee as a protective measure in view of the fact that it had filed a return, a protective registration could also be granted to the assessee which could later be cancelled under Section 186, if so thought fit. Accordingly, the Tribunal, vide its order dated September 23, 1985, allowed the assessee's appeal with the direction that registration be granted to the assessee.

(3.) IN the result, the reference is answered in the affirmative.