1987 (7) TMI 35 - HC - Income Tax

Summary

Issues:
Assessment of income derived from the business carried on in the name of M/s. A. Gattupalli in the status of 'body of individuals'.

Analysis:
The case involved the assessment of income derived from the business carried on in the name of M/s. A. Gattupalli in the status of 'body of individuals'. Mr. Gattupalli, who was carrying on a tobacco business, passed away leaving behind his wife and four minor sons. The widow filed a return of income disclosing only 1/5th of the income received from the sale of import entitlements. The Income-tax Officer assessed the income in the hands of a "body of individuals" consisting of the widow and her four sons, based on the common intention to exploit quota rights for business purposes. This assessment was affirmed by the Appellate Assistant Commissioner but was challenged on appeal.

The Tribunal took a different view, stating that the import quota rights were part of the properties left behind by Mr. Gattupalli and were partitioned among the widow and four sons. The Tribunal concluded that no business was carried out by the body of individuals and that the income should be taxed as individual income, not as a body of individuals. The Tribunal emphasized the deed of partition specifying the share of each heir, indicating diversion by superior title.

The High Court analyzed the facts and held that the widow and four sons did not carry on the deceased's business after his death. The income derived was from selling import entitlements, not from conducting a business together. The Court emphasized that selling the entitlements inherited and dividing the income did not constitute carrying on a business. Referring to precedent, the Court ruled that without conducting a business together, they could not be taxed as a body of individuals. Therefore, the Court answered the question in favor of the assessee, concluding that the income should be taxed as individual income, not as a body of individuals.