1998 (3) TMI 33

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..... Act"), determining the total income at Rs. 1,57,550 and the tax being worked out at Rs. 17,595 in the status of association of persons". During the course of assessment proceedings, the assessee contended that since it did not carry on any business activity, but only let out its storage sheds and rooms and as the investments were made by nine members, in the capacity of "co-owners", the provisions of section 26 of the I.T. Act would apply and the income determined in the status of "association of persons" has to be allocated to the respective "co-owners an tax has to be levied in the individual hands. The Income-tax Officer, City Circle-VII(9), Madras, however, held that the assessee's conduct had to be necessarily taken as an "adve....

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....income-tax cases appearing for the Revenue would, with all vehemence and force, contend that, on the facts and in the circumstances of the case, the activity carried on by the assessee in constructing sheds and godowns for purposes of leasing out them and deriving rental income therefrom on the lands taken out on lease must be construed, as an "adventure in the nature of trade" and the income derived from such trade cannot be any other than income from business, in the status of "association of persons" and in such state of affairs, to say that the income derived by the assessee from leasing out the godowns and sheds, constructed by them, has to be assessed as one in the individual hands of "association of persons", according to the proport....

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....he circumstances of the case. We are mainly concerned with the deed of co-ownership dated January 7, 1975. According to the said deed, nine parties therein took on lease some lands belonging to a third party to construct sheds and godowns thereon by contributing money in specified proportions and thereafter to let out such godowns and sheds and share the rental income from them, in proportion to their share of contribution. Pursuant to the agreement, it appears, godowns and sheds had been constructed and such godowns and sheds had been leased out and the rental income derived therefrom had been shared. The problem came in relation to the assessment of such rental income for the assessment year 1977-78. As to whether such rental income....