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TMI Blog1957 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the heirs of Oomer. Since the widow Luthfunnissa anticipated delay in the disposal of the application made by Noorullah to institute his suit for partition in forma pauperis she filed C.S. No. 132 of 1943 for partition. In that suit she preferred Application No. 1162 of 1943 for the continuance of the joint receivers. Why Noorullah opposed that application is not clear, but the fact remains that he did oppose it. Despite opposition, this court ordered the continuance of the receivers on May 25, 1943. Subsequent to that Sri Karunakaran was replaced by Sri K.K. Sridharan as one of the joint receivers. There was never any dispute about the fractional share to which each of the six heirs of Oomer was entitled. In due course there was a preliminary decree for partition in C.S. No. 132 of 1943. It should be noted that there was no break in the continuity of business after the death of Oomer. None of the parties desired at any time to break that continuity. First, Luthfunnissa and Dawood carried on the business. Next, it was carried on by the joint receivers appointed on March 17, 1943, and the joint receivers were continued by the order of the court dated May 25, 1943, on Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal. The Income-tax Officer recorded : The assessment will be made on the receivers as representing an association of persons consisting of Luthfunnissa Begum and the five children. After stating in paragraph 10 of his order I, therefore, hold that the provisions of section 41 are not at all applicable to this case the Appellate Assistant Commissioner recorded in paragraph 11 of his order: Even assuming without admitting that section 41 is applicable, there would still be no change in the mode of assessment as the beneficiary is the entire body of heirs as a single unit and as it is on behalf of this unit or association of persons that income, profits and gains were received by the receivers. The Tribunal recorded in paragraph 7 of its appellate order : For purpose of these appeals, the assessments presently under appeal have to be considered as having been made involving section 41 ..............as the Department has apparently invoked the section and as the procedure has not been challenged in these appeals it does not appear to us to be necessary to discuss the propriety of the assessment on the joint receivers. The assessees in these appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves. The alternative basis was set out in paragraph 12 of its order: .................the business source has been assessed as one unit on the two receivers as an association of persons. Though the proper course ....................will be to assess the joint receivers on behalf of all the beneficiaries as constituting an association of persons,.................even alternatively considering the receivers only as the contemplated assessees........................the two receivers have to be held as having jointly carried on the business in question. The Tribunal was thus of the view, that either the heirs of Oomer constituted an association of persons whom the receivers represented, or independently of that, the joint receivers themselves constituted an association of persons. The relevant portion of section 41(1) runs: In the case of income, profits or gains chargeable under this Act which..............any receiver or manager...........appointed by or under any order of a court,.............are (is) entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such..............receiver or manager....................in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips there held that an order of the court appointing managers of an estate, the order being made in accordance with an agreement entered into between the parties, did not bring the case within the section. The liability imposed by section 41(1) on a receiver appointed by court is that the tax shall be levied upon and recoverable from such a receiver in the like manner and to the same amount as it would be leviable upon and recovered from the person or persons on whose behalf such income, profits or gains are receivable. In this case the profits of the business were received by the joint receivers, but such receipts were on behalf of the six co-sharers, heirs of the deceased, Oomer. The liability imposed by section 41(1) on the joint receivers was co-extensive with that of the co-sharers, no more and no less. If the co-sharers who owned the business conducted by the receivers in the relevant years constituted an association of persons, section 41(1) would undoubtedly authorise assessment on the basis that the taxable income was that of an association of persons. That was specifically adverted to by the Income-tax Officer at the earliest stage. The departmental authorities, as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the business on behalf of the co-sharers to whom it belonged. So the question, whether the co-sharers constituted an association of persons, was really determined in this case with reference to the appointment of joint receivers on May 25, 1943. As has been repeatedly pointed out, the Act does not define what constitutes an association of persons, which under section 3 of the Act is an entity or a unit for assessment to income-tax. We shall not undertake what eminent Judges had declined to do, to evolve a formula of universal application. Whether a given group of persons to whom assessable income accrued constituted an association of persons will have to be decided primarily with reference to all the facts of that case. Our limited problem, therefore, is to decide whether the co-sharers who inherited the business of Oomer constituted an association of persons in relation to that business and in the relevant years of account. In the absence of any statutory definition, the word association has to be given its normal dictionary meaning. To associate is to join in a common purpose of action. Association does necessitate the exercise of volition of those who form th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Abdul Kareem and Co. v. Commissioner of Income-tax [1948] 16 ITR 412 (see the observations at pages 427-28). The same idea was expressed in different words by Chagla, C.J., in Indra Balkrishna v. Commissioner of Income-tax [1956] 30 ITR 320 at page 330 : In our opinion what is required before an association of persons can be liable to tax is not that they should receive income but that they should earn or help to earn income by reason of their association, and if the case of the Department stops short of mere receipt of income then the Department must fail in bringing home the liability to tax of individuals as an association of persons. Neither the fact that the heirs of Oomer inherited the business on his death and owned it thereafter as co-sharers with denned shares, nor the fact that they were entitled to and did receive their shares of the profits, either each separately or both taken together constituted them an association of persons liable to be taxed on that basis. It. is also true that the co-sharers themselves did not produce the income of the business. The business was conducted by the receivers. They were receivers appointed by the court within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business which belonged to them could be assessed in the hands of the receivers under section 41(1) on the same basis. We have held that there was material on which the Tribunal could find that the co-sharers who owned the business constituted an association of persons. That should suffice to answer the question referred under section 66(1) of the Act against the assessee. In view of what we have recorded above, it may not be necessary to discuss the question, whether the Tribunal was right in holding alternatively that the joint receivers themselves constituted an association of persons. If the assessment had been made on that basis, neither section 41(1) nor section 42(2) could have been invoked. In this case, however, the Tribunal itself was of the view, that the assessment had been made under the enabling provision, section 41(1). In deciding what should be the basis of assessment under section 41(1) the question whether the joint receivers themselves constituted an association under section 41(1) the liability of the joint receivers was the same as that of the persons whom they represented. In this case the liability of the co-sharers was to be assessed as an associat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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