G.P. Singh, C.J.
1. The question of law referred in this reference is as follows:
'Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in allowing continuation of registration to the assessee-firm for the assessment year 1973-74?'
2. The reference arises out of the proceedings for a continuation of the registration of the assessee-firm for the year 1973-74. The facts briefly stated are that Rani Padmavati Devi, wife of the former ruler of Khairagarh, obtained the lease of a forest block from the ruler on 29th December, 1947. The area included within the block was 5,585 acres. After the merger of the State of Khairagarh, the Governor of Madhya Pradesh on 23rd June, 1953, executed a lease deed in favour of the Rani. Under this lease the Rani is required to pay annual rent of Rs. 100. The lease is a perpetual lease. The lease authorises the Rani to exploit the forest within the leased area in accordance with the working plan sanctioned by the Government. It further provides that the Rani shall have a right over all the timber and fuel trees and all other forest produce of the leased forest. A partnership deed was executed first in 1963 for exploiting the forest, The partnership was registered under the I.T. Act and continuance of registration was granted in subsequent years. In 1971 the partnership was reconstituted by the retirement of one partner and the induction of a new partner. The registration of this partnership was also granted. When the continuation of registration applied for the assessment year 1973-74, the 1TO refused continuation on the ground that the partnership did not carry on any business in the relevant previous year. The AAC granted continuation, as in his opinion, the partnership carried on business. The Appellate Tribunal also took the same view.
3. The assessee-firm is registered as a dealer under the Madhya Pradesh General Sales Tax Act, 1959. The profit and loss account for the relevant account year goes to show that an amount of Rs. 13,794 was spent as jungle expenses. Further, an amount of Rs. 15,643 has been shown as expenses on account of salaries paid to the forest manager, supervisor, accountant, etc. The assessee instead of itself cutting and thereafter selling the timber and other forest produce gave four leases by contracts to different persons who cut the timber and other forest produce. The contractors paid royalty to the assessee. They also paid sales tax payable on behalf of the assessee to the sales tax dept.
4. The ITO refused continuation of registration mainly on the ground that the activity of selling the forest produce could not be held to be business. The ITO strongly relied upon the case of Ramakrishna Deo v. Collector of Sales Tax  6 STC 674 (Ori.) in support of the finding that the activity of merely selling forest produce does not constitute business. The case of Ramakrishna Deo was decided under the Orissa SalesTax Act. Under the Sales Tax Acts, what is relevant is whether theperson concerned is a dealer carrying on the business of sale or purchase which may make him liable for payment of sales tax. As the Government and other proprietors of forest while granting leases for cutting and removing forest produce cannot be said to indulge in the sale of forest produce with frequency and continuity, it has generally been held that they do not become dealers liable to sales tax. In Board of Revenue v. A. M. Ansari : 3SCR661 , which was a case where the Government of Andhra Pradesh gave leases for plucking, cutting and carrying away forest produce, it was observed :
'The auctions of the, forest produce by the Government of Andhra Pradesh are admittedly carried on only annually and not at frequent intervals. Thus the important element of frequency being lacking in the instant cases, it cannot be held that the said Government was carrying on the business of sale of forest produce.'
5. The I.T. Act does not deal merely with business of selling or purchasing. Under Section 28 of the Act, the profits and gains of any business which was carried on by the assessee at any time during the previous year are taxable. Under the term 'business', as defined in Section 2(13) of the Act, it is not essential that there should be a series of transactions, and, even a single transaction may constitute business: (See Kanga and, Palkhivala's Income Tax, 7th Edn. vol. 1, p. 114), In Karanpura Development Co. Ltd. v. CIT : 44ITR362(SC) , the assessee was a company formed with the objects of acquiring and disposing of underground coal mining rights in certain coal fields. The leases were acquired for a term of 999 years and were sublet for the balance of the terms of the respective leases minus two days. The company never worked the coal fields with a view to raising coal, nor did it acquire or sell coal raised by the sub-lessees. The Supreme Court held that the transaction of granting sub-leases was in the nature of a trading transaction. It was observed that the ownership of property and leasing it out may be done as a part of a business, or it may be done as a land owner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. This case was followed in S. G. Mercantile Corpn. P. Ltd. v. CIT : 83ITR700(SC) . In this case a company took on lease a market place. It developed the same and let out the portions thereof as shops, stalls and ground spaces to shopkeepers, stallholders and daily casual market vendors. It was held that the taking of property on lease and sub-letting the portions thereof was part of the business and trading activity of the company. The principle of these cases applies to the instant case. The partnership was obviously formed for carrying on the business of exploitation of forest. The genuineness of the partnership is not disputed. Further, it is not stated that the partnership deed restricts the partnership business to the exploitation of forest by directly cutting and removing forest produce and does not permit exploitation of the forest by giving short term leases of the same to other persons. In these circumstances, the activity in the relevant previous year of leasing out the forest to the contractors and recovering royalty from them was in the nature of business activity assessable under Section 28. The learned standing counsel has relied upon the decisions of the Supreme Court in Narain Swadeshi Weaving Mills v. CEPT : 26ITR765(SC) and New Savan Sugar and Gur Refining Co. Ltd. v. CIT : 74ITR7(SC) . In the first case the assessee-firm ceased to do trading activity and let out the plant and machinery to a company formed to take over the business. It was held that the letting out of the plant and machinery by the assessee-firm to the company could not be held to fall within the definition of 'business'. In the second case, the assessee-company discontinued the business of crashing sugarcane and refining as advised by its managing agents and leased out the entire machinery of the factory and the premises with the obvious purpose of earning rental income and not to treat the factory and the machinery as a commercial asset during the subsistence of the lease. It was held that the rental income was not business income. On facts these cases are distinguishable, as the assessee in these cases let out the assets with the intention of closing the business or when his business had come to a close which is not the position in the instant case.
6. For the reasons given above, we answer the question referred in the affirmative in favour of the assessee and against the department. There will be no order as to costs.