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Issues: Assessment of capital gains for co-owners as tenants-in-common, status of 'body of individuals' for assessment.
Analysis: The judgment delivered by the High Court of Madras pertains to a question referred by the Revenue regarding the assessment of capital gains for co-owners of a property at No. 29, General Muthiah Mudali Street, Madras. The court considered whether the Appellate Tribunal was correct in holding that the property was enjoyed by the four brothers as tenants-in-common, and whether each co-owner should be assessed individually for their share of capital gains, rejecting the adoption of the status of 'body of individuals' for assessment purposes. The court referred to the decision in CIT v. Deghamwala Estates [1980] 121 ITR 684, emphasizing that the mere execution of a sale document by co-owners does not automatically classify them as a body of individuals under the Income-tax Act, 1961. The court highlighted the necessity of a common tie or aim among co-owners to be considered a body of individuals. In the case at hand, the four co-owners acquired the property through the surrender of life interest by their mothers, who were the daughters of the original owner. The co-owners sold the property as they found it inconvenient to own and enjoy it jointly due to their geographical separation. The Tribunal noted that apart from this transaction, the co-owners did not engage in any joint income-earning activities. The court distinguished the present case from N. P. Saraswathi Ammal v. CIT [1982] 138 ITR 19 (Mad.) where a widow and her sons were treated as a body of individuals due to the continuity of a business inherited from the deceased testator. The court emphasized that the co-owners in the present case did not voluntarily come together for income generation, unlike in the cited case. The court concluded that the four brothers could not be assessed as a body of individuals since they did not engage in any joint income-earning activities beyond the sale of the property inherited from their mothers. The judgment favored the co-owners, answering the question against the Revenue. As there was no representation from the assessee, no costs were awarded in the reference. The court's decision was based on the lack of common activity or intention among the co-owners beyond the sale of the property inherited from their mothers, thereby rejecting the characterization of the co-owners as a body of individuals for assessment purposes.
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