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Assessment of income tax on a widow and her children from a business they jointly own. Analysis: The case involved a widow and her children who jointly owned a business, leading to a dispute over the assessment of income tax. The widow initially objected to being assessed on the entire income, arguing that she should only be taxed on her one-third share, while her children should be separately assessed on their two-thirds share. This argument was accepted, and the widow was assessed on her one-third share, with the children being assessed separately. However, a subsequent notice called for a revision of the assessment based on a decision from the Lahore High Court. The Income Tax officer then assessed the widow for the total business income, considering it as one business conducted by her and her children. The Assistant Income Tax Commissioner upheld this revised assessment, leading to an appeal and a subsequent reference to the High Court. The main question referred was whether a single assessment should be made on the widow for the entire business income or separate assessments should be made for her and the other heirs based on their respective shares. The argument presented before the High Court focused on the interpretation of Section 3 of the Income Tax Act, particularly the term "association of individuals." The widow's advocate contended that this term referred to unincorporated companies and did not apply to the widow and her children's case. Additionally, it was argued that minors could be separately assessed under Section 40 of the Act, with the tax levied from the guardian. However, the court clarified that Section 40 and related sections were not charging sections but machinery sections, enabling the Income Tax officer to assess trustees or guardians representing beneficiaries. In this case, the Commissioner found that the widow was conducting a business with combined resources, leading to the assessment under Section 10, Clause 1. The court emphasized that Section 40 did not prevent such an assessment when justified, especially in cases where a business is carried out jointly. The court referred to a similar case from the Lahore High Court, where a business conducted by trustees for the benefit of beneficiaries was assessed as one business. This precedent supported the view that when multiple individuals contribute resources to a business jointly, it can be considered an association of individuals for tax assessment purposes. The court highlighted that in cases where guardians or trustees carry on a business on behalf of multiple individuals, the entire group can be assessed through the person conducting the business. Despite acknowledging potential hardships, such as minors being unable to claim refunds individually, the court concluded that Section 10(1) empowered the Crown to assess the person conducting the business when multiple individuals jointly owned and operated the business.
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