Letting and sub-letting as an organised commercial activity can constitute business and support a valid partnership.

Repeated acquisition of godowns on temporary lease, varied sub-letting arrangements, and active use of staff and brokers showed an organised and continuous commercial operation rather than mere enjoyment of property. The partnership deed also evidenced an intention to carry on business, so the letting and sub-letting activity was treated as business. On that basis, the partnership was held to be validly constituted.

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Issues: Whether the assessee's activities of taking godowns on lease and sub-letting them constituted a business so as to support a valid partnership.

Analysis: The activities found by the Tribunal showed repeated acquisition of godowns on temporary lease, varying terms of sub-letting, engagement of staff and brokers, and the need for continuous efforts to keep the godowns occupied. These facts indicated something more than mere management or enjoyment of existing property. The deed of partnership also evidenced an intention to carry on business, and the arrangement was not one of mere co-ownership sharing returns from property. On the settled principles governing partnership and business, the letting and sub-letting formed part of an organised and continuous commercial activity.

Conclusion: The activities constituted business, and the assessee was validly constituted as a partnership.

Ratio Decidendi: Where the letting and sub-letting of properties is carried on as an organised, continuous commercial operation requiring active steps to procure tenants and exploit the properties, the activity is business and not mere enjoyment of property.

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