YELISETTY BHADRAYYA SETTY Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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George Cheriyan, Accountant Member -
(1.) THIS appeal by the assessee relates to the assessment year 1978-79 and is against the decision of the AAC declining to interfere with the order of the ITO refusing to grant registration to the assessee-firm.
(2.) According to the order under Section 185(1)(b), the assessee, a firm of five partners, of whom the details are given below, claimed registration :
The firm was evidenced by an instrument of partnership dated 31-1-1977.
The ITO stated that according to the partnership deed the object of the firm was to construct godowns and to let out the same to the Government or private parties on rent and to divide the rent received among the partners.
(3.) THE ITO then went on to state that income from letting out of the godowns was clearly assessable under Section 22 of the Income-tax Act, 1961 ("the Act"), under the head "Income from house property" and not under Section 28 of the Act as profit from business. For that he stated that the site on which the godown was constructed belonged only to the first partner, Yelisetty Bhadrayya, and further he alone had entered into an agreement with the Food Corporation of India (FCI) for letting out the building and with the Canara Bank for taking a loan for constructing the godown. For these reasons, he came to the conclusion that there was no business activity carried on by the firm. He came to this conclusion after setting out the objects of the assessee which were primarily to the effect that as long as the firm carried on business "in the general or wider sense", it was adequate and the business need not be one under the narrower concept of the Income-tax Act. Certain judicial pronouncements were also relied on by the assessee in this regard and this have been referred to in the order declining registration. THE ITO emphasized that house owning, however profitable, was not a trade or bussiness and ownership by itself was the criterion of assessment under the Income-tax Act. According to him, the cases relied on by the assessee were not similar on facts.;
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