TMI Blog1973 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law referred for ascertaining the opinion of the High Court was : " Whether, on the facts and in the circumstances of the case, the department was justified in assessing the assessee in the status of an association of persons ? " In this case we are concerned with the assessment of the assessees for the assessment years 1957-58 to 1962-63. In all these years the assessees were assessed as an " association of persons ". The contention of the assessees is that in the years, in question, they should have been assessed as " individuals " and not as an " association of persons ". Therefore, the only question that calls for decision is as to the status of the assessee during the relevant assessment years. For deciding the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own on June 27, 1955. Later Nadar executed a settlement deed in favour of his four grandsons, namely, G. Murugesan, G. Kathiresan, G. Raja Shankar and G. Vettrivel. The property covered by the said settlement deed included a house property, which had been let out. Under this settlement deed, the donees are to enjoy during their lifetime the properties gifted and thereafter the same was to devolve on their children. Some time thereafter, Nadar purchased a number of shares in joint stock companies in the name of " G. Murugesan Brothers ". For each of such purchase, a debit entry was made in the books of the firm. The share applications addressed to the companies for the transfer of the shares from the prior owners to the name of G. Muruges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were confirmed by the Appellate Assistant commissioner. But, on a further appeal to the Appellate Tribunal, the Tribunal held that the assessee should be assessed as " individuals " and not as " association of persons ". At the instance of the Commissioner, the question set out earlier was referred to the High Court. The High Court answered that question in the affirmative and in favour of the revenue. The High Court was of the opinion that because of the facts that the shares were purchased jointly in the name of G. Murugesan Brothers, the transfer applications were filed by Padmavathy acting as guardian of all the assessees, and further, after Murugesan became major, he collected the dividends jointly on behalf of the assessees, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, the association must be one the object of which is to produce income, profits or gains. This was the view expressed by Beaumont C.J. in Commissioner of Income-tax v. Laxmidas Devidas, at page 589 and also in In re Dwarkanath Harishchandra Pitale. In In re B. N. Elias, Costello J. put the test in more forceful language. He said; ' It may well be that the intention of the legislature was to hit combination of individuals who were engaged together in some joint enterprise but did not in law constitute partnerships ...... When we find. . . . . that there is a combination of persons formed for the promotion of a joint enterprise. . . . . then I think no difficulty arises whatever in the way of saying that ...... these persons did consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a minor can join an " association of persons " if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an " association of persons " from the mere fact that they jointly own one or more shares, and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an " association of persons ". But unfortunately for the assessee for the assessment years 1957-58 and 1958-59, they themselves had submitted their returns in the status of " association of persons ". Those returns were neither withdrawn nor did they file fresh returns as " in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the High Court that during the assessment years 1959-60 to 1962-63, the assessees should be held as having functioned as an " association of persons ". Mr. Karkhanis in support of the contention of the revenue relied on the decision of the Bombay High Court in S. C. Cambatta v. Commissioner of Income- tax. Therein, the only question was whether when an action is taken by an Income-tax Officer under section 23A, the dividend deemed to have been declared to the shareholders must be considered as having been taken by a husband and wife who were the joint holders of a share as an " association of persons " or by the husband alone who under the articles of association was to act on behalf of the joint holders. The contention of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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