UNTWALIA, C.J.

1. These are two references under section 256 (1) of the Income Tax Act, 1961 (hereinafter called as the Act) by the Income Tax Appellate Tribunal, Patna Bench on the following question of law:–

"Whether on the facts and circumstances of the case the assessee was carrying on business and is entitled to be registered as a firm"?

2. The assessment year in question are 1963-64 and 1964-65, the corresponding periods being the calendar years 1962 and 1963 respectively. The assessee namely, Messrs Khas Benedih Colliery, Dhanbad constituted a partnership firm as per deed of partnership which was registered on 11-1-1949. Till the assessment year 1962-63, which was also governed by the Act, the assessee was assessed in the status of a firm. In the assessment year 1963-64 the assessee filed a declaration in accordance with the section 184(7) of the Act, for continuation of the registration accorded to it in the past. There was no change either in the share ratio of the partners or in the constitution of the firm. The Income Tax Officer, however, refused to grant registration of the continuance of the registration under section 185 read with section 186(1) of the Act. He found that the colliery which was worked by the firm was leased out to a managing contractor, Sri N.M. Shah, for a period of seven years with effect from 1-9-1961. It would thus be seen that in the calendar year 1961, relating to the assessment year 1962-63 for a good portion of the year business was undoubtedly carried on by the partnership firm. But in the accounting years 1962 and 1963 the colliery was in the hands of the managing contractor, Sri N.M. Shah. On a consideration of the terms of the deed dated 20-9-1961, a copy of which is Annexure B to the statement of the case, the Income Tax Officer held that the assessee was no longer carrying on any business, it had leased its property namely the colliery and therefore, registration could not be allowed to be continued. On appeal by the assessee, the appellate, Assistant Commissioner took a different view. He thought that the leasing out was of the running business or the commercial assets of the assessee and, therefore, registration was directed to be allowed and continued. The Department went up in further before the Income Tax Appellate Tribunal. The tribunal allowed the Department's appeal, set aside the order of the appellate Assistant Commissioner and restored that of the Income Tax Officer. On being asked to refer a case, it has stated it and referred the question of law aforesaid for determination by this Court.

3. Before I proceed to discuss the question of law referred to this court I may dispose of two points urged by learned counsel for the assessee which, strictly speaking, may not be said to arise from the appellate order of the Tribunal, yet they may be briefly noticed in ' this judgment.

4. Learned counsel submitted that once registration was granted under section 184 (1) of the Act, it had to be continued of fulfillment of the conditions of sub-section (7) of the section 184. I do not find any substance in this argument. Registration granted for the earliest years under the Act will continue if the conditions mentioned in sub-section (7) are fulfilled and it is inherent in the nature of granting registration or allowing its continuance that the partnership firm must be a firm carrying on business. If it is found that in the relevant year the firm had parted with its property in relation to which it was carrying on business and was no longer carrying on any business activity, then the registration cannot be allowed to be continued.

5. Learned counsel for the assessee then submitted on the basis of some observations of the Punjab High Court in the case of Nauharchand Chananram vs. Commissioner of Income Tax, Punjab, 82 I.T.R. 189 that it mattered little whether the partnership was for the purpose of earning profit within the meaning of section 10 of the Income Tax Act, 1922 correspond