Association of persons(AOP) - Definition / Legal Terminology - Income Tax

''Association of persons as used in section 2(31) of the Income tax Act 1961 means- an association in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one, the object of which is to produce income, profits or gains - N.V. Shanmugham Co. v. CIT- 1970 (4) TMI 27 - SUPREME COURT. For forming an ''association of persons' the members of the association must join together for the purpose of producing an income. An ''association of persons' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, volition on the part of the members of the association is an essential ingredient. Even a minor can join an ''association of persons' if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an ''association of persons' from the mere fact that they jointly own one or more shares, and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an ''association of persons' - G. Murugesan Bros. v. CIT- 1973 (2) TMI 1 - SUPREME COURT . An association of persons does not mean any and every combination of persons . It is only when they associate themselves in an income-producing activity that they become an association of persons. They must combine to engage in such an activity; the engagement must be pursuant to the combined will of the persons constituting the association; there must be a meeting of the minds, so to speak. In a nutshell, there must be a common design to produce income. If there is no common design, there is no association. This interpretation of the expression ''association of persons' flows from the meaning of the word ''association' - Deccan Wine General Stores v. CIT- 1971 (12) TMI 40 - ANDHRA PRADESH HIGH COURT . Joining together by the members of the association for the purpose of producing income is a prerequisite for formation of an association of persons. Such coming together or combining is a consensual act and depends upon the volition of the parties. Merely because certain persons are constituted joint owners, such as by inheriting the property of a person on his death, they do not become an association of persons, for, in that event, the jointness is the result of operation of law and not of volition of parties - CIT v. T.V. Suresh Chandran- 1979 (3) TMI 32 - KERALA HIGH COURT .