N.D. Ojha, J. - (1.) The following question has been referred to us by the Income-tax Appellate Tribunal for our opinion : " Whether, on the facts and in the circumstances of the case, the assessee was entitled to the benefit of continuation of registration under Section 185 during the assessment year 1971-72, even though the income derived by it daring this year was held to be assessable as income from other sources ?"
(2.) The relevant facts in a narrow compass as appear from the statement of the case drawn up by the Tribunal are that the assessee, opposite party, was carrying on business of manufacturing milk powder and other dairy products and was registered under the Income-tax Act, 1961 (hereinafter referred to as " the Act"), as a partnership firm in the year 1965-66. By virtue of declarations made in this behalf, the registration was continued in the succeeding years. In the assessment year 1971-72 also, the assessee filed a declaration under Section 184(7) of the Act claiming continuation of registration. The Income-tax Officer, however, found that during this year the assessee had derived income only from leasing out its milk spray plant and had done no business. He accordingly required the assessee to explain as to why its registration may not be cancelled. According to the Income-tax Officer, the assessee was not entitled to claim continuation of registration for the assessment year 1971-72, inasmuch as it, not having carried on any business in that year, had ceased to be a genuine firm. The Income-tax Officer after hearing the assessee cancelled its registration. In regard to the income derived by the assessee from leasing out the milk spray plant, he held that this income was from " other sources " and not from business. The order was upheld by the Appellate Assistant Commissioner of Income-tax. The appeal filed by the assessee before the Tribunal was, however, allowed. The Tribunal, after referring to its finding in the appeal against the assessment order for the year 1971-72, held that the assessee had failed to establish that there was only a temporary lull in the business during the aforesaid year and that the income derived by it from the leasing out of the milk spray plant was assessable as income from business. According to the Tribunal, the income derived by the assessee from letting out of the milk spray plant was assessable under the head " Other sources ". The Tribunal further held that simply because the income derived by the assessee from leasing out of the milk spray plant was assessable under the head " Other sources ", it cannot be said that there was no genuine firm in existence in the assessment year 1971-72. In this connection, the Tribunal, after pointing out that the assessee had admittedly carried on business in all the earlier years, held that it cannot be said that this partnership had been formed only with a view to divide the rental income of the milk spray plant between the partners.
(3.) Aggrieved by the order of the Tribunal allowing the appeal, the Commissioner of Income-tax made an application before the Tribunal under Section 256(1) of the Income-tax Act with a prayer to refer the following questions of law to this court for its opinion : "(1) Having rejected the assessee's contentions that the income from letting out of the plant was assessable as business income, whether the Tribunal was in law justified in upholding the assessee's claim for registration? (2) Whether, on the facts and in the circumstances of the case, the assessee-firm was entitled to be assessed in the status of a registered firm ?";