TMI Blog1984 (6) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... by metes and bounds. Manjappa Gowda, however, continued the management of the estate but divided the net income equally among the sharers. The reason for this type of arrangement has been disclosed in the letter written by the chartered accountant of Manjappa Gowda. He wrote a letter dated November 12, 1966, to the assessing authority stating that there was a partition in the joint family of Manjappa Gowda as on May 31, 1972, but as the properties apportioned were small in area, they were cultivating together and at the year end, the income was apportioned equally as tenants-iii-common. The letter also discloses that the individuals have filed separate returns., The assessing authority accepted the partition and the statement of the chartered accountant that the members continued as tenants-in common. He has, accordingly, made the assessment orders. He has not given any reason why even after the partition by metes and bounds the sharers should be treated as tenants-in-common. It appears that there is a lot of misconception in regard to the status of the tenants-in-common.. This is not a case in which there was a division in status. Nor were some of the joint family propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmarised the principle at page 551 thus : " ........ an association of persons must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains ........" This view was reiterated in CIT v. Raja Ratan Gopal [1966] 59 ITR 728 (SC). In Indira Balkrishna's case [1960] 39 ITR 546, the Supreme Court has added the following words of caution for those who want to interpret the term " association of individuals " (p. 552) : " It is, however, necessary to add some words of caution here. There is no formula of universal application as to what facts, how many of them and of what nature, are necessary to come to a conclusion that there is an association of persons within the meaning of section 3 ; it must depend on the particular facts and circumstances of each case as to whether the conclusion can be drawn or not." Against this background, let us now examine the facts found in the case. The HUF of which Manjappa Gowda was the manager consisted of his wife and children. The father was cultivating the estate and man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all the members have joined as association of individuals since they realised that they were not in a position to cultivate separately their individual share and that must be the reason why Manjappa Gowda was made the manager of the entire estate. We do not think that the liability to cultivate a bit of land by an individual and the necessity to appoint a common manager to cultivate different parcels of land owned by different individuals, could be an evidence sufficient to constitute the individuals into an association of individuals. In this context it would be useful to quote the observations of the Madras High Court in the decision in State of Madras v. S. Subramania Iyer [1966] 61 ITR 613, which reads thus (p. 623): " If the factum of common cultivation by a single agent or manager of different parcels of land owned by different persons could by itself be held to be sufficient to constitute the owners into an association of persons, it would lead to undesirable results. It is a common experience in this part of the country, where the system of absentee landlords prevails, that different owners of agricultural lands give them for cultivation to one lessee or manager o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that mere management of the properties of the divided members by Manjappa Gowda and the distribution of the income equally amongst the individuals are neither conclusive nor determinative of the question that they had formed an association of individuals for the purpose of earning income. Four of the sons of Manjappa Gowda were minors. Manjappa Gowda could not do any thing but manage the properties belonging to the minor children. It was indeed his duty as a father. In the absence of a joint venture agreed upon by all the members, the cultivation of the properties by Manjappa Gowda and distribution of the net income amongst all the individuals ipso facto cannot lead to the conclusion that the cultivation by the manager was pursuant to a joint venture agreed upon by all the individuals. The decision of the Supreme Court in M /If. Ipoh v. CIT[1968] 67 ITR 106, on which strong reliance was placed by Sri Babu, in our opinion, stands on a different footing. In that case, the family owned extensive properties scattered over many countries. There was a partition in the larger family and later on a division in the smaller family. In the smaller division, the minor was represented by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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