1999 (8) TMI 59 - HC - Income Tax

Summary

Issues:
1. Assessment of income from a clinic in the hands of the assessee as a body of individuals or separately for each heir and legal representative.

Analysis:
The case involved the assessment of income from a clinic, "National Clinical and Research and Laboratory," previously owned by Dr. A. N. Ganguly, who passed away intestate. The question raised was whether the income should be assessed as a body of individuals or separately for each heir and legal representative. The Income-tax Officer initially assessed the income as a "body of individuals" for specific assessment years following the Commissioner of Income-tax (Appeals) decision. However, the Tribunal directed the income to be assessed in the hands of each heir of Dr. A. N. Ganguly based on a different High Court decision.

The Commissioner of Income-tax (Appeals) relied on the decision of the Punjab and Haryana High Court in Meera and Co. v. CIT, while the Tribunal followed the decision of the Karnataka High Court in G. N. Sunanda v. CIT. The Revenue argued that the business in question was a proprietary concern run by Dr. A. N. Ganguly, and therefore, the income should be assessed as a body of individuals, as per the Punjab and Haryana High Court's decision.

The High Court emphasized that the clinic was a proprietary concern of Dr. A. N. Ganguly, and after his demise, it was run by his second wife on behalf of the minor son and unmarried daughter. The court noted that the business was not a partnership concern, distinguishing it from cases involving partnership firms. The court highlighted the concept of "unity of interest" in cases of business run by partnership firms, where profits are divisible among partners, unlike in a proprietary concern.

Referring to the decisions of the Punjab and Haryana High Court and the Gujarat High Court, the court reiterated that a "body of individuals" must be engaged in an activity with the objective of earning income. In this case, the business was continued for the common benefit of Dr. A. N. Ganguly's heirs, with his second wife managing the concern. The court upheld the status of assessing the income as a "body of individuals," as it was in the common interest of all heirs.

Ultimately, the court found no error in the orders of the Commissioner of Income-tax (Appeals) and the Income-tax Officer, concluding that the income from the proprietary concern should be assessed as a "body of individuals." The decision was in favor of the Revenue and against the assessee, based on the facts and circumstances of the case and the previous assessment year's status.

In conclusion, the High Court decided in favor of assessing the income from the clinic as a "body of individuals" in the common interest of all heirs, following the nature of the proprietary concern and the absence of a partnership firm structure.