1969 (2) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Determination of the status of the assessees as an "association of persons."
2. Applicability of Section 41 of the Indian Income-tax Act, 1922.
3. Determination of the shares of the decree holders in the maintenance awarded.

Issue-wise Detailed Analysis:

1. Determination of the status of the assessees as an "association of persons":
The primary contention was whether the assessees, comprising the widow and children of the deceased Bhupendra Nath Bose, should be assessed jointly as an "association of persons" or individually based on their specific shares. The Income-tax Officer assessed the assessees in the status of an "association of persons" for the assessment years 1955-56 and 1956-57. The Appellate Assistant Commissioner upheld this view, and the Tribunal confirmed the assessment, stating that the maintenance was not awarded based on inheritance shares but on needs, making it justifiable to assess them jointly as an "association of persons."

2. Applicability of Section 41 of the Indian Income-tax Act, 1922:
Section 41 was pivotal in determining the tax liability. The Tribunal accepted that the income-tax authority was correct in taxing the income jointly under Section 41. According to the proviso to Section 41, if the shares of the persons on whose behalf the income is received are indeterminate or unknown, the tax can be levied as if the income were that of an association of persons. The court found that the shares of the individual plaintiffs in the maintenance decree were indeterminate, thus invoking the proviso to Section 41. Consequently, even though the plaintiffs did not associate to produce the income, they were deemed to be an association of persons for tax purposes.

3. Determination of the shares of the decree holders in the maintenance awarded:
The court examined whether the shares of the decree holders in the maintenance awarded by the decree dated 1st February 1955 were equal and determinate. It concluded that the decree provided the plaintiffs jointly the right to receive certain sums of money without specifying individual shares. The maintenance awarded was not based on any proportionate share but was a collective sum for the plaintiffs. Therefore, the shares were indeterminate, justifying the assessment as an association of persons under the proviso to Section 41.

Conclusion:
The court answered the referred question in the affirmative, holding that the Tribunal was right in assessing the assessees as an association of persons for the years 1955-56 and 1956-57. The income received was on behalf of persons whose shares were indeterminate, thus invoking the proviso to Section 41. The court did not find it necessary to consider whether the assessees associated in creating the income by joining in the suit, given the conclusion reached under Section 41. Each party was ordered to bear its own costs.

Separate Judgment:
Judge Deb concurred with the judgment delivered.