Business definition for excess profits tax excludes a partnership merely collecting rent and royalty from a sub-lease.

A partnership that had acquired a mining lease, granted a sub-lease, and then only collected rent and royalty was not carrying on a business under the Excess Profits Tax Act. The definition of "business" in Section 2(5) was controlling, and the deeming proviso treating investment-holding as business applied only to companies or incorporated societies, not to a partnership. Because the syndicate did not work the minerals and merely held the leasehold property, the receipts were treated as property or other-source income, and Rule 4(4) could not enlarge the charging provision. The receipts were therefore not liable to excess profits tax.

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Issues: Whether a partnership that acquired a mining lease, granted a sub-lease, and thereafter merely collected rent and royalties from the sub-lessee was carrying on a "business" within the meaning of the Excess Profits Tax Act, so as to attract excess profits tax.

Analysis: The definition of "business" in Section 2(5) of the Excess Profits Tax Act, 1940, was held to be controlling. The proviso deeming the holding of investments or other property to be a business applied only to companies or incorporated societies, and not to a partnership. On the facts, the syndicate did not itself work the minerals and its activities after the sub-lease were confined to holding the leasehold property and receiving rent and royalty. Such receipts were treated as income arising from property or other sources, not as profits of a business. Rule 4(4) of Schedule I could not enlarge the charging provision or override the statutory definition of business.

Conclusion: The syndicate was not carrying on a business within the meaning of the Act, and the receipts from the sub-lease were not liable to excess profits tax.

Ratio Decidendi: A partnership that merely holds property and derives rent or royalty from it does not carry on a business for excess profits tax purposes, and a deeming provision confined to companies or incorporated societies cannot be extended to partnerships.

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