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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 ..... ciation 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 - ITA No. 463 of 2009 - - - Dated:- 26-7-2012 - MR. AJAY KUMAR MITTAL. AND MR. G.S. SANDHAWALIA. JJ. PRESENT: Ms. Radhika Suri, Advocate for the appellant. Mr. Kuldeep Singh, Advocate for Mr. G.S. Hooda, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of a bunch of eight appeals bearing ITA Nos. 463, 464, 559 of 2009, 49, 51 and 217 to 219 of 2010 as according to the learned counsel for the parties, the primary issue involved therein is identical. For brevity, the facts are being extracted from ITA No. 463 of 2009. 2. This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order dated 22.1.2009 passed by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee was asked to file the return who filed return of income declaring nil income. It was pleaded that since no land was purchased, therefore, the status of the co-owners cannot be treated as AOP and that the income of the plinths was assessed by the department in the hands of individual as per their shares in the property. The Assessing Officer vide order dated 10.10.2007 assessed it as AOP treating the entire income from plinths as income from other sources in the hands of AOP determining tax payable by applying Section 167B(2) of the Act. Against the order of the Assessing Officer, an appeal was filed before the Commissioner of Income Tax (Appeals), Bathinda [in short the CIT(A) ] who vide order dated 19.3.2008 dismissed the appeal. Still feeling dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 22.1.2009 rejected the appeal holding that the proceedings under Section 147 of the Act have been rightly initiated and the income has rightly been assessed as AOP. Hence, the present appeal by the assessee. 4. We have heard learned counsel for the parties and have perused the record. 5. Learned counsel for the appellant-asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant supported the order passed by the Tribunal. He submitted that since there was one joint account opened by the assessee, they were rightly assessed as an association of persons and even Form-16A was issued in one name only. 8. After giving our thoughtful consideration to the respective submissions, we find considerable force in the submissions made by the learned counsel for the appellants. The Tribunal had erred in coming to the conclusion that the status of the assessee would be an association of persons. 9. The core question that arises for adjudication in these appeals is whether the appellants are to be assessed as 'Association of Persons' or as 'Individuals'. 10. In ITA Nos.49, 51 and 217 to 219 of 2010, besides the aforementioned issue, appellants have raised substantial question No.2 therein that the income arising from renting of plinths was assessable under Section 26 of the Act. At the outset, it may be noticed that in so far as the head under which the income from rental of plinths is to be assessed, the same stands settled by the Division Bench judgment of this Court in Gowardhan Das Sons v. Commissioner of Income- Tax, Jalandhar, (2007) 288 ITR 481, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......... of every individual, HUF, company and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually." In the absence of any definition as to what constitutes an association of persons, we must construe the words in their plain ordinary meaning and we must also bear in mind that the words occur in a section which imposes a tax on the total income of each one of the units of assessment mentioned therein including an association of persons. The meaning to be assigned to the words must take colour from the context in which they occur. A number of decisions have been cited at the bar bearing on the question, and our attention has been drawn to the controversy as to whether the words " association of individuals" which occurred previously in the section should be read ejusdem generis with the word immediately preceding, viz., firm or with all the other groups of persons mentioned in the section. Into that controversy it is unnecessary to enter in the present case. Nor do we pause to consider the widely differing characteristics of the three other associations mentioned in the section, viz., Hindu un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved as under:- 6. This Court in Commissioner of Income-tax, Bombay v. Indira Balkrishna (1960) 39 ITR 546 (SC): TC44R.916 considered the question as to what an AOP means. The test laid down in three cases: In re B. N. Elias Others In re (1935) 3 ITR 408 (Cal): TC44R.913; CIT vs. Laxmidas Devidas (1937) 5 ITR 584 (Bom): TC44R.914 and In re, Dwarkanath Harischandra Pitale (1937) 5 ITR 716 (Bom): TC44R.915, was accepted by this Court as correctly laying down the crucial test for determining what is an AOP and that in each case the conclusion has to be drawn from the circumstances. In the first case the test was laid down as applying to combinations of individuals who were engaged together in some joint enterprise but not constituting a partnership. Such a combination of persons formed for the promotion of a joint enterprise banded together as if they were " coadventurers" it was held would constitute an association of individuals. In the second case, that is, Commissioner of Income-tax v. Laxmidas Devidas and Another (1937) 5 ITR 584 (Bom): TC44R.914 Beaumont, C.J. at page 589 laid down the test as follows: " In my opinion, the only limit to be imposed on the words 'other a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the four brothers as association of individuals . Under s. 3 of the Act for the financial year commencing on Ist April, 1950, and for every subsequent financial year, agricultural income-tax shall be charged in accordance with and subject to the provisions of the Act on the total agricultural income of the previous year of every person. Person has been defined in s. 2(k) of the Act to mean any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either as owner, trustee, receiver, common manager, administrator, or executor or in any capacity recognized by law, and includes an undivided Hindu Family, firm or company. A combined reading of these two provisions indicates that assessment can be made on an individual or an association of individuals. The question is whether the respondent should be assessed as an individual or along with his co-sharers as an association of individuals . The expression 'association of individuals' was found in the Indian IT Act, before the words AOP were substituted by the amendment Act of 1939. The word person is more comprehens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions laid down the test that, to constitute an association of individuals two or more individuals should have been joined in the promotion of a joint enterprise with the object of producing income, profits or gains. In the present case, the said test is not satisfied. The four nephews of Raja Khaja Pershad succeeded to the estate as co-sharers and each one of them was entitled to share of the income from the estate. They did not form a unit for the promotion of any joint enterprise to earn income, profits or gains. The collection of the entire income from the estate by one of the sharers or even by a common employee will not make that income an income from a joint venture. Each of the sharers gets his income as an individual and not as an association of individuals. In this view, the High Court was right in answering the first question in favour of the respondent. Similar view was taken by the Hon'ble Apex Court in G.Murugesan and Bros's case (supra). 16. The Kerala High Court in R. Valsala Amma's case (supra) held that a joint gift made by two sisters to their brothers by a common gift deed, the sisters having separate interest in the property would not make them taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of each case as to whether the conclusion can be drawn or not. The Court made it further clear that no test is conclusive or determinative . 18. Civil appeal against the aforesaid decision was dismissed by the Hon'ble Supreme Court as reported in Commissioner of Income Tax v. Shiv Sagar Estate (2002) 257 ITR 59 (SC). 19. From the above, it emerges that 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'. Conversely, the mere accruing of income jointly to more persons than one would not constitute thereon an association of persons in respect of such income. In other words, 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. Unless the members combine or join in a common purpose, it cannot be held that they have formed themselves into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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