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1982 (1) TMI 28 - HC - Income TaxAppeal To Tribunal, Association Of Persons, Body Of Individuals, Nature Of Body Of Individuals
Issues Involved:
1. Tribunal's jurisdiction to entertain a new plea raised by the respondent. 2. Classification of the assessee as a "body of individuals" (BOI) for tax assessment. Detailed Analysis: 1. Tribunal's Jurisdiction to Entertain a New Plea Raised by the Respondent: The primary issue was whether the Tribunal had the jurisdiction to entertain a new plea raised by the respondent (the department) during the appeal. The Tribunal entertained the department's new plea that the assessee could be taxed as a "body of individuals" (BOI), even though this was raised for the first time during the appeal. The court referred to the Supreme Court's decision in Hukumchand Mills case [1967] 63 ITR 232, which held that the Tribunal could determine any point raised in the appeal, short of enhancing an assessment. The Supreme Court observed that the Appellate Tribunal Rules were not exhaustive and that the Tribunal's jurisdiction was broad enough to entertain new pleas raised by the respondent. The court emphasized that the Tribunal's power to entertain a new plea is derived from the statutory provisions, specifically s. 33(4) of the Indian I.T. Act, 1922, and s. 251(1) of the I.T. Act, 1961. Both provisions mandate that the Tribunal "shall pass such orders thereon as it thinks fit" after hearing the parties to the appeal. This language was interpreted to mean that the Tribunal could entertain new points raised by the respondent. Further, the court cited CIT v. Madras Industrial Investment Corporation Ltd. [1980] 124 ITR 454, which reinforced the principle that neither the assessee nor the department is restricted to the pleas put forward at earlier stages. The Tribunal has the discretion to admit new pleas, even if it involves investigating new facts. The court concluded that the Tribunal had the jurisdiction to entertain the department's new plea and decide the appeal based on it, as long as the new plea came from a party to the appeal. 2. Classification of the Assessee as a "Body of Individuals" (BOI) for Tax Assessment: The second issue was whether the Tribunal was correct in classifying the assessee as a "body of individuals" (BOI) and assessing them as such for the relevant assessment years. The assessee argued that as legatees under the will, they were tenants-in-common and should be assessed separately for their individual shares of income. They contended that a mere plurality of individuals interested in a source of income does not constitute a BOI. They cited the Supreme Court decision in Indira Balkrishna's case [1960] 39 ITR 546, which ruled that co-heirs or co-legatees cannot be assessed as an "association of persons" (AOP). The court, however, distinguished between an AOP and a BOI. It noted that "body of individuals" is a new classification under the I.T. Act, 1961, and should not be equated with an AOP. The court explained that while an AOP requires a common intention and common activity to produce taxable income, a BOI only requires a plurality of individuals with a nexus to a source of income. The court observed that the family group in question (a widow and her four sons) were united by family ties and the bequest of a business under the testator's will. The business continued as a single unit, indicating that the family members were acting as a BOI, even though they had the option to disrupt the business and take their individual shares. The court concluded that the assessees constituted a BOI, as they continued their relationship and economic activities as a group, despite having the option to end it. Formal Answers to the Questions of Law: 1. The Tribunal had jurisdiction and the right in law to permit the respondent to raise a new plea for the first time in the assessee's appeal and to decide the appeals on that new ground. 2. The Tribunal was right in law and had material to hold that the assessments should be made in the status of "body of individuals" for the assessment years 1967-68 to 1971-72. The court answered both questions in the affirmative and against the assessee, awarding costs to the department.
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