JUDGMENT 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. 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 corresponding to section 28 of the Act or whether it was deriving income from some other sources under section 12 of the old Act, corresponding to section 56 of the Act. In my opinion, this argument is in the teeth of the definition of 'Partnership' given in section 4 of the Indian Partnership Act, 1932, as also against various forms prescribed for applying for registration or for filing of declarations. It is also against the decision of the Calcutta High Court, which I respectfully agree in the case of Sunil Krishna Paul vs. Commissioner of Income Tax, 69 I.T.R 457. 6. I now proceed to discuss the main point in the case. The relevant clause of the deed under consideration have been copiously quoted not only in the Appellate order of the Tribunal but also in the statement of the case. I would like to point out here that it was not necessary to quote all the clauses in the statement of the case when the deed was going to be annexed as an Annexure, as lightly it had been done. Be that as it may, it would be noticed from the important clauses in the deed that many of the clauses are very much similar, some of them even identical to the clauses of the deed which was the subject matter of consideration before the Supreme Court in the case of New Savan Sugar and Gur Refining Co. Ltd. vs. Commissioner of Income Tax Calcutta, 74 I.T.R. 7. It is not necessary for me to refer to and discuss each and every clause of annexure B. The use of the words 'principal' and 'agent' throughout the lease is a misnomer. The deed seems to have been drafted in a manner as if the assessee was appointing Sri N. M. Shah as its agent, but it is not a case where the agent was appointed to carryon the business on behalf of the principal. The deed clearly was on by the lessor, namely the assessee to the lessee, namely, the so-called agent. The question for consideration is whether it was a lease of the property namely the colliery or whether it was a lease of the commercial assets of the assessee. Various tests have been laid down by the Supreme Court in numerous decisions which a Bench of this Court of which I was a member, had the occassion to consider in the case of Messrs Ray Talkies, Dhanbad vs. The Commissioner of Income Tax Bihar and Orissa, Tax cases 11 to 14 of 1968 Date 2.8.1973. Various tests have been laid down by the Supreme Court in numerous decisions which a Bench of this Court of which I was a member, had the occassion to consider in the case of Messrs Ray Talkies, Dhanbad vs. The Commissioner of Income Tax Bihar and Orissa, Tax cases 11 to 14 of 1968 Date 2.8.1973. In that case it was held that the lease was of the commercial assets. A few of the clauses which bring about the vital distinction between the – case of the Ray Talkies and the instant one are:– "(1) Clause 2 of the deed in the case of Ray Talkies fixed the liability and responsibility for the renewal of the licence for running the cinema during the period of the lease and the payment of the Licence fee for the renewal thereof on the lessors, that is, the assessee. This was a vital part of the business activity of the lessors. This is absent in the instant case. (2) Clause 10 fixed the responsibility in the case of Ray Talkies for the purpose of getting assets insured on the lessors, subject only to this condition that the premium of a policy to a maximum of two lacs of rupees was to be paid by the lessee. This was also a part of the business activity in that case which is absent in this case. (3) Clause 15 put a restraint on trade on the part of lessors. This gain was very intimately connected with the question as to whether the lease was of the commercial asset of the property, namely, the cinema house. (4) One of the vital differences between that case and this case that clause 22 of the former reserved office premises for the lessors in the cinema premises. Here there is no such reservation." The only clause is clause 17 which gave to the principals, namely the lessors or their representative liberty to stay in the proprietor's bunglow and cast an obligation on the agent, namely, the lessee to provide all facilities, including supply of free electricity and water for their stay there. This was merely for the purpose of residence, unconnected with any business activity. This was merely for the purpose of residence, unconnected with any business activity. In the Supreme Court case after referring to the various clauses of the deed, Ramaswami, J., who delivered the judgment on behalf of the Court, said at page 14: – "It appears from clause 2 and 5 that the existing machinery which was owned by the lessor could not be removed and that the lessee would be entitled to set up additional machinery without interference from the lessor and that on the termination of the lease the lessee would be entitled to remove the same without causing any damage to the property demised. Clause 3 contemplates that if during the period 1945-46 the lessors sell the commodity manufactured the price thereof should go back to the lessee, Mr. Choudhury referred to clause 6 which entitled the lessee to use the railway siding during the period of the lease. But this clause cannot in any way be construed as the exercise of control over the business of the assessee. The provision for minimum royalty of Rs. 65,000/- per annum indicates that the assessee had no direct interest in the production of the factory. The cumulative effect no concern with the production of the factory which is the principal part of the business, previously carried on by the lessor. The provisions in clause 17 are that lessors shall keep the demised premises insured to the full value and to repair and replace the machines which are of capital nature. On a scrutiny of all the clauses of the indenture of lease, our conclusion is that the intention of the assessee was to part with the entire machinery of the factory and the premises with the obvious purpose of earning rental income. It was not the intention of the assessee to treat the factory and machinery etc. as a commercial concern during the subsistence of the lease. The primary condition for the application of section 10 of the act is that tax is payable by an assessee under the head." "Profits and gains of business, in respect of business carried on by him. When an assessee does not carry on business at all section 10 cannot be applicable and the income that he receives cannot bear the character of profits of business. When an assessee does not carry on business at all section 10 cannot be applicable and the income that he receives cannot bear the character of profits of business. As we have already shown there is no direct nexus between the income of the assessee and the production of the factory. The royalty payable to the assessee was not paid under clause 7 of the indenture of the lease for the production in the factory. The production was only a measure of the royalty to be paid and, in any event, the measure of payment had nothing to do with the character of the payment as a receipt from business or from other sources. It follows that in the circumstances of this case, the income of the assessee cannot be characterised as income of from the activity of the assessee carrying on business. The High Court was therefore right in holding that the income of the assessee was liable to be assessed under section 12 and not under section 10 of the Act." 7. Clauses similar to clause 2 and 5 are to be found in this deed also. The machinery was to be utilised by the lessee. He was at liberty to put in new machineries and he was also at liberty to remove them. The stock of coal which was at the beginning of the lease was given to him as per clause 16 and the rate of Rs. 10/- per tonne while the stock of coal which would remain on the expiry of the lease was to be removed by the then lessee at his own cost within three months from the date thereof. The royalty per tonne was fixed so was the minimum guarantee of Rs. 25,200. As per clause 12 and 13, as was the case before the Supreme Court. In my Opinion, reading the deed (Annexure B) in its totality, I have no doubt in my mind that the owners of the mining rights created a sub-lease and appointed Sri N. M. Shah as the sub-lessee of the lease. 25,200. As per clause 12 and 13, as was the case before the Supreme Court. In my Opinion, reading the deed (Annexure B) in its totality, I have no doubt in my mind that the owners of the mining rights created a sub-lease and appointed Sri N. M. Shah as the sub-lessee of the lease. It was not a lease of the running business or commercial asset it was a lease of the property with which surely the commercial asset had to go but the dominant object of the lease was not to grant a lease of the commercial asset, retaining some business activities with the lessors but to grant a sub-lease of the colliery. That being so, the case of Ray Talkies is clearly distinguishable and, in my opinion the present case is squarely covered by the decision of the Supreme Court in the case of New Savan Sugar and Gur Refining Co. Ltd., 74 I.T.R. 7. 8. For the reasons stated above, I answer the question of law referred to this Court in the negative against the assessee and in favour of the Revenue. I hold that on the facts and circumstances of this case, the assessee was not carrying on business and was not entitled to be registered as a firm or recognised as a registered firm within the meaning of the Act. The Assessee must pay the costs of this reference. Hearing fee is assessed at Rs. 100/- only. I agree. Reference answered against the assessee.