TMI Blog1995 (2) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... e common question of law referred to this court for opinion under section 256(2) of the Act is the same which reads as follows: "Whether the Tribunal was correct in annulling the assessment of the assessee-association of persons and in directing that the income of the association of persons should be divided between Sri and Srimati Rajgarhia and assessed in their hands ? " For the rest of the cases referred to under section 256(1) of the Act, the common question of law referred to this court for opinion reads as follows : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income of the assessee from mica mining business should not be assessed as a unit in the status of association of persons but should be divided between Sri and Smt. Rajgarhia and assessed in their respective hands ? " The brief facts leading to the references as mentioned above may now be noted. The assessee in all these cases is Messrs. Chandmal Rajgarhia, Giridih. In a partition suit filed by the two major sons of Sri Chandmal Rajgarhia, the mica mining business was allotted jointly to Chandmal Rajgarhia and his wife, each having an equal share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer to assess income-tax in the hands of the members of association of persons, namely, Sri Chandmal Rajgarhia and Smt. Chandmal Rajgarhia. According to learned counsel, section 4 read with section 2(31) of the Act does not give any option to the authority to assess the members of association of persons when the "association of persons" is a unit for purposes of assessment before the taxing authority. In support of the above contention, learned counsel has placed reliance on three judgments-one of the Madras High Court, another of the Karnataka High Court and the third of the Kerala High Court, namely, Estate of A. Mohamed Rowther (by power agent) v. CIT [1963] 49 ITR 39 ; Late Bhoomiamma (K.) (Smt.) v. CIT [1992] 194 ITR 723 and CIT v. C. Karunakaran [1988] 170 ITR 426. In Estate of A. Mohamed Rowther v. CIT [1963] 49 ITR 39, a Division Bench of the Madras High Court, while considering the scope of the phrase "association of persons", in the course of the judgment, has observed as follows (at page 46) : " It is now settled law that mere co-ownership is not sufficient to justify an assessment by the Department, treating the co-owners as an association of persons (see Indira B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, moved the High Court. In the reported judgment the learned judges, after finding a distinction between the charging section 3 of the old Act read with section 2(9) and the charging section 4 of the present Act read with section 2(31), observed that the idea of the present section 4 seems to make the provision simpler and to divest the authorities of any discretion to treat the income of one unit as the income of another unit. The concept of association of persons has been recognised as a taxable unit for which purpose a statutory status is recognised. On the scope of section 4 of the present Act, the learned judges held as follows : "Under section 4 of the present Act, tax shall be charged in respect of the total income of the previous year of every person, which means, in the case of an association of persons, it will read as, that tax shall be charged in respect of the total income of every association of persons. No option to treat the income of the association of persons as the income of the members of the association of persons individually is forthcoming (except for the purpose of section 86 with which we are not concerned here). The above reasoning of ours f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the association individually") has been discussed at page 233. An earlier decision of the same High Court was dissented from because the said decision had not considered the change in the language of section 4." Ultimately, the learned judges answered the question in the negative and against the Revenue. In CIT v. C. Karunakaran [1988] 170 ITR 426, a Division Bench of the Kerala High Court, while considering the phrase "association of persons", observed as follows : " A commercial adventure of co-owners of assets with a view to obtaining and dividing the profits among them ordinarily assumes the characteristic of a partnership and is generally so regarded in law. If, however, their relationship falls short of a partnership by reason of any legal infirmity or for whatever cause, their activities in the pursuit of profit may still assume, albeit not in the strictly legal sense, some of the attributes of a firm or partnership, and they will be treated as an association of persons for the purpose of assessment. In Mohammad Aslam v. CIT [1936] 4 ITR 412, the Allahabad High Court pointed out that an association of persons has some of the attributes of a firm or partnership though n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 ITR 79 (Patna), Laxmichand Hirjibhai v. CIT [1981] 128 ITR 747 (Guj) and CIT v. V. H. Sheth [1984] 148 ITR 169 (Bom). In the latest case CIT v. V. H. Sheth [1984] 148 ITR 169 (Bom), it has been held as follows : "In other words, once the assessment of a partner or a member of an association has been made by taxing directly his proportionate share from the firm or association, the Income-tax Officer is precluded from assessing the firm in the status of an unregistered firm or an association of persons. The circular clarifies that although the Supreme Court's aforesaid decision is under the Indian Income-tax Act, 1922, the Board is advised that it will equally apply to assessments made under the Income-tax Act, 1961. This circular set out in the above paragraph is binding on the Income-tax Department as per the decisions of the Supreme Court in the cases of Navnit Lal, C. Javeri v. K. K. Sen, AAC of I. T. [1965] 56 ITR 198 and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913. In view of this, it is clear that the Income-tax Officer was not entitled, in the facts and circumstances of the case, to tax the assessee as an association of persons. In view of this conclusion, question ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
