1983 (12) TMI 2 - HC - Income Tax

Summary

Issues Involved:
1. Whether the receiver was appointed to carry on the cinema business of Shri Padmanabha Theatre.
2. Whether the receiver carried on the business in question.
3. Whether the receiver represented the individual interests of the co-owners, making the assessment as a single unit unsustainable.
4. Whether the assessment on the receiver in the status of an "association of persons" was correct.

Detailed Analysis:

1. Appointment of Receiver to Carry on Cinema Business:
The court examined whether the receiver, Thiru M. S. Menon, was appointed to carry on the cinema business of Shri Padmanabha Theatre. The order dated July 10, 1969, appointing the receiver, empowered him to take possession of the theatre and collect rents, issues, and profits. The receiver was not directed to carry on the business but to manage the property and collect income. Hence, the court found that the receiver was not appointed to carry on the cinema business, but merely to collect rents.

2. Receiver's Role in Carrying on Business:
The Tribunal found that the receiver was only collecting rents from the theatre, not conducting any business. The receiver's role was limited to managing the property and distributing the income among the quondam partners. The Tribunal distinguished this case from N. V. Shanmugham & Co. [1971] 81 ITR 310, where the receivers were directed to continue the business. The court agreed with the Tribunal's finding that the receiver was not carrying on the business and was merely collecting rental income.

3. Representation of Individual Interests:
The court considered whether the receiver represented the individual interests of the various co-owners. It was established that the receiver was collecting rents as an agent or trustee for the quondam partners, who were joint owners of the theatre with equal shares. The receiver was not conducting a joint venture but merely collecting rental income from the property. Consequently, the receiver could not be assessed as an "association of persons" but should be assessed based on the individual shares of the co-owners.

4. Assessment as an "Association of Persons":
The court examined the applicability of sections 160 and 161 of the Income-tax Act, which deal with the liability of a representative assessee. The receiver, as a representative assessee, should be assessed in the same manner as the beneficial owners. The court referred to the Supreme Court's decision in C. R. Nagappa v. CIT [1969] 73 ITR 626, which clarified that the assessment of a representative assessee should follow the status of the persons entitled to the income. The court concluded that the receiver should be assessed based on the individual shares of the quondam partners, not as an "association of persons."

Conclusion:
The court held that the receiver was not appointed to carry on the cinema business but to collect rents. The receiver did not conduct any business and merely collected rental income. The receiver represented the individual interests of the co-owners, and the assessment should be made based on the individual shares of the quondam partners. The assessment of the receiver as an "association of persons" was not sustainable. The common question referred to the court was answered in the affirmative and against the Revenue. The Revenue was directed to pay the costs of the assessee, with counsel's fee set at Rs. 500.