The mere holding of shares or property, without any intention to dispose of or deal in the same for earning profits, does not constitute a business.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1976-77 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that as the assessee was only investing funds in shares, it was not doing business ?

( 2 ) IF the answer to the above be in the affirmative, whether the Tribunal was justified in refusing registration to the firm on the ground that the assessee was doing no business ?"2. The brief facts obtaining in the case are that the business of the assessee-firm is said to be investment in shares and finance as per the objects mentioned in the deed of partnership. The deed of partnership was made on April 20, 1975, constituting a firm consisting of ten partners and admitting one minor to the benefits of partnership to start business:

( 3 ) IN respect of the previous year relevant to the assessment year 1976-77, the assessee-firm claimed registration under Section 185 of the Act for which Form No. 11 was filed in time. The Assessing Officer declined to allow the registration, as he came to the conclusion that there was no business carried on by the firm this year. He passed the order after obtaining the necessary direction under Section 144b from the Inspecting Assistant Commissioner who observed as follows :"the firm does not appear to be registered with the Registrar of Firms, there does not appear to be any bank account opened in the name of the firm, there is no trade licence to do any business. "

( 4 ) THE firm had not incurred any expenses like rent, electricity, etc. , which can ordinarily be called business expenses. The only transaction during the year appears to be purchases from three companies of shares worth Rs. 11,19,875 of certain companies controlled by the partners of the assessee-firm. Most of the partners of the assessee-firm have substantial interest in the companies which sold the shares. It is very strange that all the seven transactions of purchase had taken place on the same date, i. e. , April 23, 1975, and involved companies belonging to the same group in which the partners of the assessee-firm are substantially interested. There were no other transactions throughout the accounting year except the seven transactions on a single date. Even these transactions cannot be called either investment in shares or dealing in shares. Only the ownership of the shares held by some companies in the group had been changed to shares of some other companies in the same group presumably with a view to put up a show that there was business during the year. Accordingly, the seven transactions mentioned above can neither be categorised as investment in shares nor as dealing in shares. Business necessarily implies a profit motive and, in the instant case, this is singularly lacking. "business without profit is not business any more than a pickle is candy". Besides, business connotes an organised activity for the purposes of earning profit and it denotes a continuous and systematic exercise of the activity. The normal expenses incurred in the course of business are absent in this case and, taking into account the entire facts and circumstances of the case, it can undoubtedly be said that there was no business activity whatsoever during the accounting year. Without business, there is no profit and without profit there is no sharing of profits and, therefore, the conditions in the partnership deed with regard to the sharing of profits remain unfulfilled.

( 5 ) IT was observed from the profit and loss account and the balance-sheet of the assessee that the assessee borrowed Rs. 11,20,000 from Messrs. Gazanund Bisweswarlal and Co. , a proprietary concern of Shri Jagmohan Jatia, one of the partners of the present firm. The said money was invested by the assessee in shares as noted under :

Date Shares of Purchased from No. of shares Value Rs .

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