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TMI Blog2013 (2) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... law:- "1. Whether on the facts and circumstances of the case, the Ld. ITAT is justified in upholding the action of the Ld. AO, initiating the proceedings u/s 147 of the Act, on mere change of opinion on any other ground? 2. Whether on the facts and circumstances of the case, the plinth rental income is not assessable as income of A.O.P. and is assessable as individual income of the co-owners?" 3. Briefly stated, the facts necessary for adjudication of the present appeal are that five persons, namely, S/Sh. Sunil Nagpal, Sudhir Nagpal, Raj Kumar Nagpal, Adarsh Kumar Nagpal and Smt. Saraswati Nagpal were co-owners of the agricultural land known as 'Nagpal Farms' inherited from their forefathers situated at Old Fazilka Road, Abohar and executed a General Power of Attorney on 26.3.1996 in favour of Sudhir Nagpal appointing him to construct plinths on their joint agricultural land in the names of all the owners and to further lease out such open plinths to any party on their behalf. The land was not purchased for the purpose and it was inherited by them and they were the owners not in their joint capacity but in their individual capacity with a definite/defined proportion of share. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs on rent to the Punjab Civil Supplies Corporation Ltd., Chandigarh and was let out as coowners whereas the Assessing Officer, the CIT(A) and the Tribunal had erred in treating the income as that belonging to the association of persons. It was contended that unless the persons had joined hands as an association of persons for carrying on any venture, income therefrom could not have been taxed as belonging to association of persons. It was also argued that while treating the co-owners as association of persons, the Assessing Officer had treated the income from other sources which was contrary to the basic principle that if joint venture was there then income could be assessed as income from the business only. Reference was made to the following judgments:- I. Commissioner of Income Tax v. Indira Balkrishna (1960) 39 ITR 546 (SC); II. Mohamed Noorullah v. Commissioner of Income Tax, (1961) 42 ITR 115 (SC); III. Commissioner of Agriculture Income Tax v. Raja Ratan Gopal, (1966) 59 ITR 728(SC); IV. G. Murugesan and Bros v. Commissioner of Income Tax, (1973) 88 ITR 432 (SC); V. R. Valsala Amma v. Commissioner of Gift Tax, (1969) 72 ITR 579 (Ker); VI. Commissioner of Income Tax v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is assessed under section 22 of the Act and not the income from renting out of open land or some kutcha plinth only. In the present case, no building having been let out, there is no question of treating the rent received. What is covered by the expression "appurtenant" is the land which is necessary for enjoyment of the building and not the land only. Similar issue came up for consideration before Madras High Court in M. Ramalakshmi Reddy v. CIT (1998) 232 ITR 281, where the issue was decided against the assessee and in favour of the revenue." Accordingly, it is held that the rent received from letting out the plinths is assessable under Section 56 of the Act and therefore, provisions of Section 26 of the Act have no applicability. 11. Taking up the primary issue as to whether the assessee could be assessed in the status of 'Association of Persons' or not, it would be appropriate to refer to 'person' as defined in Section 2(31) of the Act. The definition of 'person' as given in this clause is inclusive and not exhaustive. Section 2(31) of the Act reads thus:- "2(31) "person" includes-- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmidas Devidas (1937) 5 ITR 584 (Bom): TC44R.914 and In re: Dwarakanath Harishchandra Pitale (1937) 5 ITR 716 (Bom): TC44R.915. In re: B. N. Elias (supra) Derbyshire, C. J., rightly pointed out that the word "associate" means, according to the Oxford dictionary, " to join in common purpose, or to join in an action." Therefore, AOP must be one 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. This was the view expressed by Beaumont, C. J., in CIT v. Laxmidas Devidas and Another (1) at page 589 and also in In re: Dwarakanath Harishchandra Pitale (supra). In re: B. N. Elias (supra), Costello, J., put the test in more forceful language. He said "It may well be that the intention of the legislature was to hit combinations of individuals who were engaged together in some joint enterprise but did not in law constitute partnership ... When we find, ..... that there is a combination of persons formed for the promotion of a joint enterprise .... then I think no difficulty arises in the way of saying that .... thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which is to be managed for the purpose of producing income, profits or gains falls within the words 'other association of individuals' in s. 3; and under s. 9 of the Act, the Association of individuals is the owner of the property and as such is assessable." In that case it was also held that the fact that one of the assessees was a minor during the year of the assessment did not affect the question. In In re Dwarkanath Harischandra Pitale (supra) the assessees were two brothers who became entitled to certain house properties as tenants in common and held and managed the properties as such and derived profit therefrom. It was held that though the assessees in the first instance did not constitute an association of individuals, they became so when they elected to retain the property and manage it as a joint venture producing income. The test there laid down was that as soon as there was election to retain the property and manage it as a joint venture the persons so electing became an association of individuals. The Rangoon High Court in The CIT vs. Baporia (1939) 7 ITR 225 (Rang) also laid down the same interpretation of the words "association of individuals". That was a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trued the said expression used in the Indian IT Act and held that it did not apply to co-widows of a Hindu in the circumstance of that case. The three co-widows succeeded as co-heirs to the estate of their deceased husband and took a joint tenancy with the right of survivorship and equal beneficial enjoyment. They were entitled as between themselves to an equal share of the income. Either of them could not enforce an absolute partition, though for the purpose of convenience of enjoyment they could divide the property and enjoy their respective shares of the income therefrom. The question arose whether they should be assessed as individuals or as an AOP. Das J. speaking for the Court, accepted the following test to ascertain whether two or more persons constituted an "association of individuals" within the meaning of the IT Act: "An AOP must be one 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." The learned judge then gives the caution that there is no formula of universal application and that the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individuals who make the gift must be associated in respect of the title or ownership of the property which is transferred. To put it differently, a gift must be one made by two or more individuals who own the property as an association of individuals. In our view, if two or more persons execute one deed of gift in favour of the same person in respect of properties which belong to them individually, or in which they have separate and distinct rights, it cannot make them an association of individuals. It would be a joint gift by different individuals, between whom there is no association of interest in respect of the gifted properties." 17. Dealing with identical issue, Bombay High Court in Shiv Sagar Estates' case (supra) where 65 persons purchased property not as an AOP but as co-owners and there was no change in their status as co-owners qua the property, it was held that the 65 persons who had purchased the property having definite and determinate shares could not be held as an AOP only on the ground that the lease was executed by a single document. While adjudicating the issue in favour of the assessee, it was observed:- "We have carefully considered the rival submissions. We ..... 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