Law:

Section:

section 184(7) of the Income-tax Act, 1961 - Firm - Registration - Continuation of -Assessee, a registered firm, transferred its business and agreed to render certain services to transferee and in consideration was to receive certain commission - On examination of account books, ITO found that commission was received by assessee during relevant period and, thus, assessed it as business income while taking assessee's status as of registered firm - However, Commissioner held that during relevant period assessee having transferred its business was not carrying on any business and was not entitled to retain its registration - Whether Commissioner's finding was unsupported by evidence and registration was to be allowed to assessee -Held, yes Facts During the relevant accounting period, the assessee, a registered firm transferred its business to another party. The assessee agreed to render certain services to the transferee with the object of retaining the agencies and customers of the transferred business in consideration of which the transferee agreed to pay to the assessee, a sum calculated at 0.25 per cent of the net turnover for the period during which the transferee continued to use the name of the business transferred. The ITO, after examining books of account and relevant entries, found that the income had been received by the assessee as commission on the basis of 0.25 per cent of the turnover of the transferee's business. The ITO, thus, assessed the income of the assessee as business income while taking its status as that of registered firm. The Commissioner suo motu revised the ITO's order and held that the assessee having transferred the business during the relevant year, did not carry on any business and was not entitled to retain its registration. Accordingly, he set aside the assessment and directed a fresh assessment treating the assessee as an association of persons. On appeal, the Tribunal restored the order of the ITO and held that the assessee was entitled to retain the registration. On reference : Held Whether a business was in fact carried on, is a question of fact. The ITO looked at the books of account, examined the relevant entries and…

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