TMI Blog1996 (10) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income from gifts and presents said to have been received during the above years. It was stated that the gifts had been offered for tax for want of strict proof. The Assessing Officer noticed, from the records, that the nucleus for the capital of the ' Body of Individuals ' was paltry gifts of few thousand rupees received in April 1978 and 1979. Initially it was claimed by the assessees that the gifted property was invested in purchase and sale of philatelio and allied materials. Subsequently, the assessees had been offering as income gifts claimed to have been received every year. At the end of the previous year, relevant to the assessment year 1987-88, it was found that the capital had swelled to a great extent. It was further noticed that the entire capital had been invested in M/s. India Tin Industries or its allied concerns such as M/s. Ganeshalal Gopilal, Gouri Industries, Sri Sugar Agencies, Mayura Caps Ltd., Maruthi Tins Ltd. and M/s. Chouthmal Jayanarayan Co ;. Shri S.B. Kakani was the Managing Director of M/s. India Tin Industries. The members constituting the ' Body of Individuals ' who are the respondents here are close relatives of S.B. Kakani. It was also noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic exclusion was made only in respect of companies and cooperative societies. Now, the learned departmental representative has filed the following additional grounds of appeal in addition to the grounds already taken in the grounds of appeal, and has numbered the additional grounds as grounds No. 5, 6 7 : Ground No. 5 : " . . . . the CIT(A) erred in holding that being a Body of Individual, maximum marginal rate under section 167(A) was not applicable in the case of the Assessee. On the facts of the case as all the BOIs have acted with a common purpose and intent in as much as the funds from all the BOI's (twenty to be specific) have flown to the various firms and Companies of the same ground (para 2 of the Asst. order) this activity shows that these were actually AOP and not BOI (39 ITR 540 --- Supreme Court in CIT v. Indira Balakrishna). He should have therefore held that actually being AOP, these persons whose returns were deliberately filed in the status of BOI were liable to be taxed at the maximum marginal rate (reliance is placed on 138 ITR 14, Madras High Court in N.P. Saraswathiammal v. CIT, Madras and 154 ITR 148 (SC). Ground No. 6 : " The CIT(A) has erred in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute should not be read into it. For this proposition, reliance is placed on the following decisions : (i) CIT v. Ajax Products Ltd [1965] 55 ITR 741 (SC) ; (ii) Atlas Cycle Industries Ltd v. State of Haryana [1972] 85 ITR 121 (SC) ; (iii) Keshavji Ravji Co. v. CIT [1990] 183 ITR 1/49 Taxman 87 (SC) ; (iv) CIT v. R. J. Trivedi Sons [1990] 183 ITR 420 (MP) ; and (v) Goodyear India Ltd v. State of Haryana [1991] 188 ITR 402 (SC). It is further argued that during the-accounting years relevant to the assessment years under consideration, as per the provisions of section 167A, the provisions of that section were applicable only to AOPs and not to BOIs. It was only subsequently, that is w.e.f. 1-4-1989, the section 167A was omitted and, in its place, a new section viz. 167B, was inserted, including the BOI along with AOP for the purpose of taxing at the maximum marginal rate of tax. It is argued that this amendment should not be said to be retrospective in operation. There is no implication for the retrospective operation of this provision. Unless there is an implication, it is argued, that the amendment should be taken as only prospective and not retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividuals ' with a colourable device to avoid payment of tax as held by the Hon'ble Supreme Court of India in the case of McDowell Co. Ltd v. CTO [1985] 154 ITR 148/22 Taxman 11, Shri Venkatesan quoted a decision of the Supreme Court of India in the case of CWT v. Arvind Narottam [1988] 173 ITR 479 at 487/39 Taxman 368. It is contended on behalf of the assessee that the revenue has now come with the additional grounds as it is not confident of its original grounds of appeal. On behalf of the assessees, reliance is placed on a decision of this Bench (Single Member) in ITA Nos. 655 to 700/Bang/1989, dated 5-2-1993. In that order the Single Member has set aside the order of the CIT passed under section 263 and held that the status of the assessees is BOI and not AOP. Though the order of the Single Member is not binding on the Division Bench, it is stated that it has got persuasive effect. Finally he supported the orders of the first appellate authority. 6. We have heard the rival submissions. The first point to be decided is whether the additional grounds raised by the revenue are to be admitted or not. In the additional grounds, the revenue contends that the assessees are not BO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. " We are in agreement with the argument on behalf of the assessees that the provisions of section 167A, as they stood during the assessment years 1987-88 and 1988-89, did not speak of ' Body of Individuals ' but only ' Association of Persons '. It was only in the new section, section 167B, which was inserted w.e.f. 1-4-1989 the words ' Body of Individuals ' were brought into. We are of the considered opinion, as rightly argued on behalf of the assessees, that words which are not there should not be read into the statute. Our view is supported by the various decisions on which reliance is placed on behalf of the assessees. (b) The Hon'ble Supreme Court in the case of Atlas Cycle Industries Ltd has held : " A taxing provision always receives a strict interpretation for the obvious reason that there must be a clear and express language imposing a tax and indicating the date from which such tax shall come into effect." It is also held by the Hon'ble Supreme Court that there cannot be any taxation by implication. (c) In the case of Ajax Products Ltd also the Hon'ble Supreme Court held : " The subject is not to be taxed unless the charging provision clearly imposes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra law inherited his estate which consisted of immovable properties, shares, money lying in deposit and a share in a registered firm. The Appellate Tribunal found that they had not exercised their right to separate enjoyment and that except for receiving the dividends from the shares and the interest from the deposits jointly, they had done no act which had helped to produce the income. The question was whether the three widows could be assessed in the status of an " association of persons " within the meaning of section 3 of the Income-tax Act, in regard to the income derived from the properties inherited by them. On a reference, the High Court held that they could not be assessed as an association of persons. On appeal, the Hon'ble Supreme Court held : " (i) that co-widows succeeded as co-heirs to the estate of their deceased husband and took as joint tenants with rights of survivorship and equal beneficial enjoyment ; they were entitled as between themselves to an equal share of the income. Though they took as joint tenants, no one of them had a right to endorce an absolute partition of the estate against the others so as to destroy their right of survivorship. But they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed as BOIs or AOPs. Hence, we hold that this case law does not help the case of the revenue at all. (iv) Reliance has also been placed by the learned departmental representative on the same Madras High Court decision to show what is meant by " Body of Individuals " and " Association of Persons ". This is what is stated by their Lordships of the Madras High Court : " Body of individuals is a new classification in the fiscal statute. Right from 1939, if not from 1922 onwards, the I.T. Act had known and recognised the distinct category of taxpayers going by the name of association of individuals or association of persons (AOP). Although the expressions were left undefined, courts used to associate this class of persons with certain attributes, chief amongst which was their being associated in a common endeavour for producing taxable income. This at once excluded from the category those who found themselves thrown together by the accident of their birth, by the accident of another's death, by the accident of testamentary dispositions, and so on. To hold, therefore, that ' a body of individuals ' (BOI) must be equated to an ' association of persons ' would be to disregard the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be held that AOP also included BOI. In this case, the assessees have shown the status as BOI with a colourable intention of avoiding payment of tax. As stated earlier, on behalf of the assessee, to counter the above argument of the learned departmental representative, reliance is placed on the decision of the Supreme Court in the case of Arvind Narottam especially the last portion of the decision at pages 486 487, where Sabyasachi Mukharji, J observed : " I agree with the judgment of the learned Chief Justice. There is, however, one aspect of the matter on which some arguments were advanced at the time of hearing of this case, to which I would like to advert. Dr. V. Gauri Shankar, appearing on behalf of the Revenue, made an appeal before us stating that we should really construe the three trust deeds together and see ' the game of the hidden purpose ' behind these trust deeds which were, in fact, for the sole and exclusive benefit of the assessee. He drew our attention to the observations of Justice Chinnappa Reddy, with which other learned judges of the Full Bench agreed in McDowell Co. Ltd v. CTO [1985] 154 ITR 148 (SC). He invited us to hold that having regard to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed with an intention to do an activity for the purpose of earning profit. Such an activity is absent in the case of a BOI. Therefore, the assessees here cannot be termed as ' association of persons '. (viii) Further, when the original section 167A was in existence, we hold that the Legislature never intended to include ' Body of Individuals ' in its stride to tax at the maximum marginal rate. It was only to BOIs also section 167A was omitted and a new section 167B was brought into existence. Had it been the intention of the Legislature that BOIs should also be taxed at the maximum marginal rate it could have stated so in section 167A. Intentions cannot be read unless it is made clear. (ix) Further, similar issue came up before the Single Member of this Bench, for assessment years 1985-86 and 1986-87, who decided, in his order dated 5-2-1993, that the status of the assessee is ' Body of Individuals '. The question to be decided there was whether the assessees were BOIs or AOPs. In that order, the Single Member has held that the status of the assessee was never disputed by the CIT, as contended by the learned departmental representative. It was also held that, if once, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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