T. Kochu Thommen, J.
1. Instead of the four questions sought to be referred by the Revenue, the Tribunal referred the following question :
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a firm in existence in the previous year relevant to the assessment year 1975-76 and registration to the firm had been correctly allowed by the Income-tax Officer for the aforesaid assessment year '
2. During the period relevant to the assessment year 1975-76, the assessee entered into an agreement dated October 15, 1973 (annexure E), with certain persons. In terms of that agreement, the business carried on by the assessee was transferred to the second party to the agreement on certain conditions. Two of the conditions alone are relevant for the purpose of this case. They are contained in Clauses 6 and 7 which read as under :
'6. The party of the first part hereto further agrees to assist and render such services as may be necessary to retain the agencies and customers and guide the party of the second part from time to time to maximise the business of the party of the second part.
7. In consideration of the above, the party of the second part agrees to pay the party of the first part a sum calculated at 1/4% of the net turnover for such period as the party of the second part uses the name 'Dadha & Co. (Kerala)Y'.'
3. These clauses show that 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 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.
4. By order dated October 18, 1975 (annexure A), the Income-tax Officer brought to tax a sum of Rs. 39,142 which, according to the officer, was the amount received by the assessee during the relevant accounting year as commission on the basis of 0.25 per cent. of the turnover of the transferee-company. The Income-tax Officer thus found that 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.
5. The Commissioner of Income-tax by his order dated October 17, 1979, suo motu revised the order of the Income-tax Officer. The Commissioner held that the assessee having transferred the business daring the relevant year did not carry on any business and the firm 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.
6. On appeal by the assessee, the Tribunal held that although the business was transferred, the assessee did not cease to do business, as is clear from the terms of the instrument under which the business was transferred. The Tribunal further held that the amount found to have been received by the assessee represented its business income and that the assessee was entitled to retain the registration.
7. The question is whether the assessee continued as a firm even after the transfer of the business so as to retain its registration under the Income-tax Act, 1961, during the relevant year. Relying upon the decision of the Madras High Court in K. Viswanathan v. Namakchand Gupta, AIR 1955 Mad 536, counsel for the Revenue submits that existence of business is a sine qua non of partnership. In that case, Venkatarama Ayyar J. (as he then was), speaking for Rajamannar C. J. and himself, observed (at page 540) :
' There can be a partnership only if there is some business to be carried on under it. Where there is no business to be done, there can be no question of partnership. The existence of a business is a ' sine qua non ' of partnership. Section 4 of the Indian Partnership Act, 1932 (9 of 1932), defines 'partnership' as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. In Mollwo March & Co. v. Court of Wards (10 Beng LR 312 at page 320 (PC)), the Privy Council observed : ' To constitute a partnership, the parties must have agreed to carry on the business and to share profits in some way in common'.'
8. Whether a business was in fact carried on is a question of fact. The fact must be examined, as Lord Justice Lindley says (cited in Ramniklal Sunderlal v. CIT : 36ITR464(Bom) ) :
' Look at the facts : look at the evidence ; look at the accounts ; look at the way in which the parties acted ; and see what is the proper inference from all that.....'
9. This is what the Income-tax Officer in fact did. He looked at the books of account ; he examined the relevant entries ; and, he appreciated the facts. He then Came to the conclusion that Rs. 39, 142 received by the assessee during the relevant year represented commission paid on the basis of 0.25 per cent. of the turnover of the transferee. That is the basic fact found by the Income-tax Officer and with which the Commissioner did not interfere. Without interfering with that finding, the Commissioner concluded that no business was carried on by the assessee during the relevant year. That was a perverse finding because it was unsupportecl by evidence and directly opposed to the clear finding of the Income-tax Officer.
10. The Tribunal, in our view, rightly accepted the facts found by the Income-tax Officer and rightly rejected the unsustainable finding of the Commissioner. The conclusion reached by the tribunal is well founded.
11. In the circumstances, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue.
12. We direct the parties to bear their respective costs in this tax referred case.
13. A copy of this judgment under the seal nf the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.