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TMI Blog1993 (12) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ng business in sweet-meats, and they were able to marry three daughters of Sitamma and her only son. Besides this, they were able to save an amount of Rs. 50,000. With the said amount, and in partnership with one Paddaboina Rama Dasu, they began construction of a cinema hall by the side of a canal in Burada Raghavarapuram, in the land owned by Smt. Sitamma. Construction of the cinema hall was not yet completed by 6-5-1956, on which date Sitamma executed an unregistered will bequeathing her property described as 'self-acquired property'. A copy of the will is filed before us. In the said will, it is described that after the death of the testator, Sitamma her son Venkatadri, his two wives, viz., Laxmikanthamma and Padmavathamma, and their daughters born to Venkatdri and Padmavathamma, viz. Chandrakala, Sesbaratnamma and Baby Sarojini, and the subsequent issues of Venkatadri, are all entitled equally in the cinema hall belonging to Sitamma. It is made very clear in the will that it is not permissible for Venkatadri to enjoy the cinema hall to the exclusion of others. All legatees should equally enjoy the property, while carrying on business in it. (b) By the date of the execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the date of dissolution of the firm, and to direct the 1st defendant, Venkatadri, to pay the plaintiff, her due share. The clauses in the decree are important and hence, those that are felt to be important, are extracted hereunder:--- "(1) That the plaintiff and defendants 2 to 5 have each 16 paise share and the defendant No. 1 has 20 paise share in a rupee in the partnership firm; (2) That the Projector, generator, the electrical fittings of the cinema hall are not the self-acquisition of the defendant No. 1 and that the plaintiff is entitled to a share in them; (3) (4) That the rent realised on the cinema hall by the defendant No. 1 during his management was only Rs. 50 per day; (5) That it is declared that the plaintiff has received from the defendant No. 1 profits due to her from 22-3-1966 to 28-2-1968; (6) That it is declared that the suit cinema hall constitutes the property of co-ownership of the parties to the suit but does not constitute an asset of the partnership; (7) (8) That the partnership between the plaintiff and the defendants shall be deemed to have been dissolved as and from 27-9-1974." From the above, it is very clear to our minds that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net income. (g) For assessment year 1977-78, assessee did not file any return whatsoever. The ITO, therefore, issued notice under section 148. As per xerox copy of the order-sheet filed before us by the learned departmental representative, the reason given by the ITO for the issuance of notice under section 148 is as follows:--- "I have reason to believe that by reason of omission or failure on the part of the assessee to make a return under section 139 for the year, the income chargeable to tax has escaped assessment for the year 1977-78." The said notice under section 148 was issued on 29-3-1982 even after the receipt of the notice under section 148, assessee did not come forward and file any return, though it was called upon to do so by the said notice. Then the ITO completed the assessment under section 144 read with section 148 on 11-3-1986, from which this appeal arose for assessment year 1977-78. From the lease amount deposited in the court, the ITO had given 10 % reduction towards depreciation and thus determined the total income of the assessee at Rs. 69,760. While completing the assessment, he levied interest of Rs. 26,598 under section 139(8). (h) Facts relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961. No definition of 'Body of Individuals' was found given in the Income-tax Act, 1961. It should be found out only from the decided case-law. The ingredients of the term 'Body of Individuals' were found discussed elaborately by the Andhra Pradesh High Court in Deccan Wine General Store's case. Their Lordships of the A.P. High Court held in that case that there was certain distinguishing features between the term 'Association of Persons' and the term 'Body of Individuals'. Firstly, they held that the absence of any design is what principally distinguishes a 'Body of Individuals' from an 'Association of Persons'. Further, 'Body of Individuals' should comprise only human beings in it, and not juristic persons like companies, etc. At page 117, Their Lordships of the A. P. High Court, examining the true meaning of the term 'Body of Individual' held the following: "We are of the view that the expression 'Body of Individuals' should receive a wide interpretation, perhaps not wide enough to include a combination of individuals who merely receive income jointly without anything further as in the case of co-heirs inheriting shares or securities. But certainly wide eno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of dissolution. Therefore, there was no scope even to allege that Shri Venkatadri had conducted the business on behalf of all the other co-legatees subsequent to 27-9-1974. So much is about the business. 7. Now, with regard to the ownership of the cinema hall or the management of the cinema hall as such, or the yield or the receipt of returns from the cinema hall, the Revenue did not put forward any particular plea or was any such plea substantiated. In fact, there was neither a plea nor proof in that regard. We are concerned with assessment years 1977-78, 1978-79 and 1979-80, for which the previous years ended by 31-3-1977, 31-3-1978 and 31-3-1979 respectively. The previous years relevant to these three assessment years are far subsequent to the date of dissolution of the firm, viz., 27-9-1974. The suit filed or the decree obtained did not concern themselves, with the ownership of the cinema hall, can be seen from one of the important clauses of the decree itself. Even the decree fortifies the correct position that the cinema hall should be considered as co-ownership property. 8. Learned counsel for the assessee, Shri K.S. Viswanathan, submitted before us that from the very be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, for pressing their respective claims against the lease amounts realised by the Commissioner which were deposited in the court by the co-legatees in this case, in our considered opinion, no common design or combined will of the co-legatees is required. Therefore, we agree with the contention of the learned counsel for the assessee, Shri K.S. Viswanathan that the status of the assessee cannot be determined as that of 'Body of Individuals' as far as these three assessment years are concerned. We also agree with his contention that unlike in Deccan Wine General Stores' case, the businesses were not carried on for any benefit by one of the co-heirs representing all other co-heirs. In that case, the mother was carrying on the three businesses for the benefit of heirs and three minor children. Whereas the same cannot be said to be the case with regard to the co-legatees under the will in this case, especially on each of the last days of the previous years relevant to the assessment years under consideration. 9. The learned counsel for the assessee relied upon the A. P. High Court decision in CIT v. Pabbati Shankaraiah [1984] 145 ITR 702. It is held in that case that the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961, and therefore, the ratio of the said decision cannot be of any help to the assessee. 11. Another decision relied upon by the learned counsel for the assessee, Shri K.S. Viswanathan, was the later A. P. High Court decision in Ambica Tobacco Co. (P.) Ltd. v. CIT [1988] 172 ITR 343. In that case, the question considered was when can an asset be said to be a business asset. Is it simply enough if an asset is capable of being put to use in business, or should it necessarily be used in business, besides being capable of being used? Their Lordships held the following as per the head-note of the said decision: "...The mere acquisition of an asset normally used for business or manufacturing activity does not make the asset a commercial asset unless it is used for the said purpose. Therefore, the user is the primary requisite for labelling the asset as a commercial asset. It is not uncommon that the same asset is capable of yielding income by putting it into the stream of business activity or leasing it out. In a situation, where the asset is leased out without exploiting the same for business or manufacture, such an asset cannot be treated as a commercial asset. The actual user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case. 13. Thus, in our opinion, assessee should be assessed only as individuals in respect of their respective shares in the cinema hall, and in respect of the share of each co-owner in the lease amount, to which he is entitled from out of the deposited lease amounts for each of the assessment years under consideration, and the assessee's status should not be determined as 'Body of Individuals'. We therefore, feel that the assessments for these three assessment years, framed in the status of 'Body of Individuals' cannot be sustained. We hereby cancel the same. 14. Regarding the additional grounds, relating to levy of interest under section 139(8) and section 217(1)(a), firstly we admit the additional grounds into these appeals. After hearing both sides, we are of the opinion that these additional grounds should succeed for two reasons. Firstly because we have already cancelled the assessments of each of the three assessment years. Since the very assessments are no longer existing, the question of levy of interest would not survive. Secondly, the ratio of the decision of the Andhra Pradesh High Court in CIT v. Padma Timber Depot [1988] 169 ITR 646 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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