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TMI Blog1963 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that they should not to be treated as an " association of individuals " and that each one of them should be assessed individually in regard to his share of the agricultural income. This contention was not accepted by the appellate authority and the appeal failed. The respondents preferred a further appeal to the Agricultural Income-tax Appellate Tribunal, Madras, and reiterated their contention that they did not constitute an " association of individuals ". The Tribunal upheld their contention and remanded the proceedings to the Income-tax Officer for a fresh determination of their respective tax liability. It is this decision which is now called in question by the State. It is urged on their behalf that the Tribunal erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; karuppan Chettiar M. Chidambaram V.RM.S.M. Karuppan (Adopted) son Chettiar & others These respondents admittedly became divided by partitioning their common estate. The partition deed is dated December 20, 1954. They held lands in Palankudi and Tholuthur villages in Thiruthuraipoondi Taluk as detailed below, during the year 1957-58. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of individuals " is a taxable entity under the Act. These words have not been defined. There is a special provision relating to income derived by, tenants-in-common and that is sub-section (3) of section 3: "In the case of persons holding property as tenants-in-common and deriving agricultural income, the tax shall be assessed at the rate applicable to the agricultural income of each tenant-in-common." The provisions of this Act are modelled upon the provisions of the Indian Income-tax Act. Under that Act also an " association of individuals ", whether corporate or not, can be taxed as a unit of assessment. Sub-section (3) of section 9 of the Indian Income-tax Act corresponds to sub-section (3) of section 3. It reads : " Where propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be given its normal dictionary meaning. To 'associate ' is to join in a common purpose of action.... To render an association of persons a taxable unit, for which section 3 provides, the object of the association must be to produce income, profits or gains. " When tenants-in-common of a property divide the income in the ratio of their definite shares without a division of the corpus by metes and bounds, they cannot be said to have earned their respective income by a joint endeavour, effort or enterprise. A joint management of the undivided property held in shares, either by one of the sharers or by a duly appointed attorney would not knit them together as an "association of individuals ". Each tenant-in-common is interested in getting h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically found that the net income is distributed in accordance with the respective shares of the assessees, and it would seem, therefore, that there was no joint venture such as was found in the Bombay and Rangoon cases. The mere fact that assessees after inheriting their shares of Karim Baksh's property, did not choose to partition does not indicate, in my view, that the co-heirs have formed any such combination for the promotion of a joint enterprise or for mutual profit such as is implied in the expression 'association of individuals' as used in section 3 of the Income-tax Act as it stood at the material time. " We may also refer to the decision of the Bombay High Court in Indira Balakrishna v. Commissioner of Income-tax. Three co-widows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case would not make the respondents an " association of individuals " as there was no common endeavour or enterprise in the matter of realisation of the agricultural income and that the mere fact of a single establishment or a common management for carrying on personal cultivation or for leasing out the property cannot band them together as an association. We are also of the view that section 3(3) of the Act, which is quite specific and clear in its terms, governs the relationship between the parties, and there is no reason why the respondents should not obtain the benefit of that provision. In our opinion, the decision of the Tribunal holding that the respondents should not be treated for purposes of tax as as " association of individua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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