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Interpretation of Section 26 of the Income-tax Act, 1961 regarding assessment of property income owned jointly by individuals. Detailed Analysis: The Tribunal referred a question of law to the High Court regarding the application of Section 26 of the Income-tax Act, 1961 to the assessment years 1970-71 and 1972-73. The property in question was jointly owned by two individuals in equal shares. The Income Tax Officer (ITO) assessed the income from the property as an association of persons, leading to an appeal by the assessee. The Appellate Authority Commission (AAC) held that the ITO could not change the assessment status from an association of persons to individual assessment for those years. However, the Tribunal determined that Section 26 applied as the shares were definite and ascertainable, mandating the income to be assessed in the status of an individual, not an association of persons. The Court emphasized that Section 26 of the Income-tax Act, 1961 is mandatory and prohibits assessment as an association of persons when shares in jointly owned property are definite and ascertainable. The ITO had no jurisdiction to assess the individuals as an association of persons and was required to include each person's share of income in their individual total income. The assessment conducted as an association of persons was deemed illegal and without jurisdiction, as per the statutory provision. In contrast to previous cases that considered the ITO's option to assess income in different capacities, the present case focused on the mandatory provisions of Section 26. The Court highlighted that Section 26 leaves no choice or option to the ITO and directs assessment based on individual shares in jointly owned property. The assessee's objection to being assessed as an association of persons further supported the Court's interpretation of Section 26. The Court answered the question of law in favor of the Department and directed the Commissioner of Income-tax to cancel the assessments made in the status of an association of persons to avoid double taxation. Both judges concurred with the decision, emphasizing the mandatory nature of Section 26 in determining the assessment status for jointly owned property income.
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