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2013 (2) TMI 371 - HC - Income TaxStatus of assessee Whether the rental income from plinth is assessable as income of A.O.P. or is assessable as individual income of the co-owners - Land in the names of all the 5 owners - Inherited from their forefathers - Rent received from letting out the plinths would fall under Income from other sources or Income from House property Held that - Following the decision in case of Gowardhan Das And Sons (2006 (9) TMI 134 - PUNJAB AND HARYANA HIGH COURT) wherein it has been held that the income from rental of plinths is to be assessed under Income from other sources and not Income from House property In order to assess individuals to be forming association of persons , the individual co-owners should have joined their resources and thereafter acquired property in the name of association of persons and the property should have been commonly managed, only then it could be assessed in the hands of associations of persons Merely accruing of income jointly to more persons than one would not constitute thereon an association of persons. Unless the associates have done some acts or performed some operations together, which have helped to produce the income in question and have resulted in that income, they cannot be termed as association of persons. The co-owners had inherited property from their ancestors and there was nothing to show that they had acted as association of persons. The income was, thus, to be assessed in the status of individual . In favour of assessee
Issues Involved:
1. Whether the initiation of proceedings under Section 147 of the Income Tax Act, 1961, was justified. 2. Whether the plinth rental income should be assessed as income of an Association of Persons (AOP) or as individual income of the co-owners. Detailed Analysis: Issue 1: Justification of Proceedings under Section 147 The appellant did not press this issue, and it was disposed of as not pressed. Issue 2: Assessment of Plinth Rental Income 1. Facts and Background: - The co-owners inherited agricultural land known as 'Nagpal Farms' and executed a General Power of Attorney in favor of one co-owner to construct plinths and lease them out. - The land was leased to Punjab State Civil Supplies Corporation Limited. - The rental income was initially declared and taxed individually by the co-owners. - The Assessing Officer later issued a notice under Section 148, treating the income as that of an AOP, leading to the assessment of the entire rental income as income from other sources in the hands of the AOP. 2. Arguments by Appellant: - The co-owners leased the plinths as individuals, not as an AOP. - The income should be taxed individually as per their shares in the property. - Cited various judgments to argue that unless there was joint management in a joint enterprise, the income could not be taxed as an AOP. 3. Arguments by Respondent: - Supported the Tribunal's order, arguing that the joint account and Form-16A issued in one name indicated an AOP. 4. Court's Observations and Rulings: - The core question was whether the appellants should be assessed as 'Association of Persons' or as 'Individuals'. - Referenced judicial precedents to define 'Association of Persons' (AOP), emphasizing that an AOP must involve a common purpose or action aimed at producing income, profits, or gains. - Cited Supreme Court rulings in Indira Bal Krishna, Mohamed Noorullah, and Raja Ratan Gopal, which held that simply inheriting property and earning income from it does not constitute an AOP unless there is joint management or a joint enterprise. - The Kerala High Court's ruling in R. Valsala Amma and the Bombay High Court's ruling in Shiv Sagar Estates supported the view that co-owners with definite shares should not be treated as an AOP merely because of joint actions like executing a lease. 5. Conclusion: - The co-owners inherited the property and did not act as an AOP. - The income should be assessed individually, not as an AOP. - The Tribunal's conclusion that the income should be assessed as an AOP was legally unsustainable. - The appeals were allowed, and the income was to be assessed in the status of 'individuals'. In summary, the court concluded that the plinth rental income should be assessed as individual income of the co-owners rather than as income of an Association of Persons, thereby overturning the Tribunal's decision.
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