Firm ownership of immovable property under tax law supports assessment of rental income in the firm's hands.

A firm can own immovable property for income-tax purposes because partnership law treats firm property as property acquired by or for the firm, and a partner has no implied authority to acquire or transfer immovable property on the firm's behalf. On that footing, a firm is a taxable person capable of holding property, and income from such property is assessable in the firm's hands rather than in the partners' hands. Section 9(3) of the Indian Income-tax Act, 1922 does not apply where the property is owned by the firm itself, and the issue was answered in favour of the Revenue.

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Issues: Whether a firm can own immovable property for income-tax purposes and whether, on the facts, the income from the property was assessable in the hands of the firm rather than the partners, with section 9(3) of the Indian Income-tax Act, 1922 applying.

Analysis: The Indian Partnership Act recognises a firm as an entity known to law and provides that the property of the firm includes property acquired by or for the firm or with money belonging to the firm. The statutory scheme also shows that a partner lacks implied authority to acquire or transfer immovable property on behalf of the firm, which reinforces the distinct treatment of firm property. In income-tax law, a firm is a person capable of owning property and being taxed accordingly. The authorities relied on supported the view that property held by a firm is to be treated as the firm's property for section 9 purposes, and that section 9(3) does not apply where the property is owned by the firm itself.

Conclusion: A firm is capable of owning immovable property, and the income from the property was rightly assessable in the hands of the firm. Section 9(3) did not apply. The question was answered in favour of the Revenue.

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