2009 (7) TMI 856 - HC - Income Tax

Provision of section 26 --Whether the Income-tax Appellate ribunal was legally justified in holding that income from the property Aggarwal Market is to be assessed in the hands of each of the co-owners separately and not in the hands of AOP - Hence the Division Bench of this court in the case relating to Aggarwal Market being Income-tax Appeal No. 53 of 2003 CIT v. Aggarwal Market decided on July 26 2007 and W.T.R. No. 134 of 1999 CWT v. Anil Aggarwal decided on July 12 2007 has taken a similar view - In view of the discussion the questions are answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Assessment of income from property 'Aggarwal Market' in the hands of co-owners or AOP.
2. Applicability of section 26 of the Income-tax Act in the case.

Analysis:
1. The case involved a dispute regarding the assessment of income from the property 'Aggarwal Market' whether it should be assessed in the hands of each co-owner separately or in the hands of the Association of Persons (AOP). The respondent-assessee, along with seven others, purchased land and constructed a commercial property jointly. They agreed to share the rental income from Aggarwal Market. The assessing authority treated the income as assessable in the hands of the AOP, whereas the Tribunal held that the income should be assessed in the hands of the co-owners individually. The Tribunal's decision was based on the fact that the shares of each co-owner were definite and ascertainable. The court, in line with the Tribunal's decision, held that under section 26 of the Income-tax Act, if the shares of co-owners are definite and ascertainable, they should be assessed individually, not as an AOP. The court also cited previous judgments supporting this interpretation.

2. The second issue raised was the applicability of section 26 of the Income-tax Act in the case. Section 26 deals with the assessment of income from jointly owned property where the shares of co-owners are definite and ascertainable. The court analyzed the facts of the case and found that the shares of income from the property 'Aggarwal Market' were ascertainable for each co-owner. Therefore, the court concluded that the provisions of section 26 were applicable in this case, and the income should be assessed individually for each co-owner. The court upheld the Tribunal's decision and ruled in favor of the assessee, stating that the Tribunal had not committed any illegality in assessing the income in the hands of co-owners instead of the AOP.

In conclusion, the High Court answered the questions in favor of the assessee, holding that the income from the property 'Aggarwal Market' should be assessed in the hands of co-owners individually based on the ascertainable shares, in accordance with section 26 of the Income-tax Act.