COMMISSIONER OF INCOME TAX Vs. KUYA AND KHAS KUYA COLLIERY COMPANY

JUDGEMENT

(1.) THESE are six references under Section 256(1) of the I.T. Act, 1961, on the following questions of law.

(2.) THE assessee is a partnership firm, constituted by deed of partnership dated January 2, 1963, consisting of P.K. Agrawal, D.K. Agrawal and J.K. Agrawal as partners. Extraction and winning of coal was the business of the firm. By an agreement dated April 26, 1965, the partners leased out the colliery to M/s. Kuya Colliery (P.) Ltd., Calcutta, with effect from April 5, 1965. Till the assessment year 1966-67, the income of the firm was assessed under the head "Business". For the assessment year 1967-68 also the partnership firm filed return showing income from colliery as income from "Business". Along with the return, the assessee filed an application under Section 184(7) of the I.T. Act. THE Income-tax Officer (hereinafter called "the ITO") held that consequent upon the execution of the agreement of April 5, 1965, the income of the firm had ceased to be income from "Business" and was assessable under the head "Other sources" and not under the head "Business". In his view, the agreement of April, 1965, created a Sub-lease in favour of the managing contractor. THE assessee had, therefore, ceased to do business in colliery operations. THE stand of the assessee was that its income was liable to be assessed under the head "Income from business" under Section 28 of the I.T. Act. THE ITO rejected the application of the assesseee under Section 184(7) of the Act to be treated as a firm and assessed it as unregistered firm. THE assessee filed an appeal against the rejection of his application for continuation of registration of the firm as also against the assessment orders. THE ground common to both sets of appeals was that the partnership was entitled to be registered as a firm and its income to be treated as income from business. In the appeal against assessment and the refusal to continue the registration of the firm under Section 184(7), the Appellate Assistant Commissioner (hereinafter called "the AAC") accepted the stand of the assessee and allowed the appeals. THE Department went up in appeal before the Income-tax Appellate Tribunal, Patna, against the appellate orders as also against the orders allowing continuation of registration to the firm. THE six appeals were disposed of by the Tribunal by a common judgment. THE Tribunal concurred with the view of the AAC and thus dismissed all the appeals. On being asked by the Department to refer a case, the Tribunal has stated it and referred the questions of law, mentioned above, for determination by this court.

(3.) THE salient aspects of the agreement in the Khas Benedih Colliery were the following I