1968 (7) TMI 12 - HC - Income Tax

Can the AO assess one of the persons for his share income in one of the businesses and again assess the AOP for the income of the same business - Held, no - because Association of Persons and the members of the association are distinct and different entities. The Income-tax Officer had an option either to assess the AOP or its members individually and not both the entities for the same income

Summary

Issues:
- Interpretation of the Indian Income-tax Act, 1922 regarding the assessment of income from a business conducted by an association of persons.
- Whether the same income can be charged repeatedly in the hands of different persons or in the hands of the same person.
- The discretion of the Income-tax Officer in assessing the income of an association of persons and the consequences of exercising that discretion.

Analysis:
The judgment by the High Court of Kerala pertains to a reference made by the Income-tax Appellate Tribunal regarding the deletion of income from "Trichur Vegetable Stores" in the assessment of an association of persons. The court considered the interpretation of the Indian Income-tax Act, 1922, specifically focusing on Section 3, which outlines the charging of income tax for different entities. The court highlighted that the same income cannot be charged repeatedly in the hands of different persons or the same person, emphasizing the principle of non-duplication of taxation.

Furthermore, the court analyzed the discretion of the Income-tax Officer in assessing the income of an association of persons and the implications of such assessment. It was noted that once the Income-tax Officer assesses the income of a business conducted by an association and charges the share of that income to one of the members, the department must adhere to that assessment method. The court emphasized that the department's choice between assessing the association as a whole or individual members is crucial and must be followed consistently.

The judgment referenced previous decisions, including Joti Prasad Agarwal v. Income-tax Officer and Commissioner of Income-tax v. Murlidhar Jhawar, to support the principle that income cannot be charged twice, either in the hands of individual members or the association itself. The court reiterated that the Income-tax Act prohibits the repetitive assessment and taxation of the same income in different entities. Consequently, the court ruled in favor of the assessee, affirming that the department was not justified in separately assessing the income of the association from "Trichur Vegetable Stores" after already assessing the individual member's share.

In conclusion, the court answered the reference question in favor of the assessee, directing the parties to bear their costs. The judgment emphasized the importance of consistency in assessment methods and highlighted the prohibition against charging the same income multiple times under the Income-tax Act. The court's decision was in line with established legal principles and precedents regarding income tax assessment for associations of persons.