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TMI Blog1968 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the assessment of the assessees in the status of an association of persons was proper?" The applicant and her sister are the daughters of one Smt. Unni Ammalu Amma, who died on May 2, 1961. Both of them got a large number of properties under their mother's last will dated December 4, 1959. By a deed dated June 7, 1961, they effected a partition of all those properties between them except two items of immovable properties in Palghat District. On June 8, 1961, they executed another deed, making a gift of these two properties in favour of their brother, Sri R. Rajan Menon. The Gift-tax Officer initiated proceedings to assess these ladies in respect of the said gift. The applicant made a nil return, and also wrote to the Gift-tax Officer by a letter dated February 29, 1964, stating that she was a permanent resident of Madras, that she made her income and other return at Madras, and that the case file may be transferred to Madras City Circle, if the Gift-tax Officer so desired. Smt. Rugmani Amma made a return in respect of her one-half share of the gifted properties. The Gift tax Officer did not transfer the case; but he assessed them on the value of the gifted properties as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The gift deed dated June 8, 1961, describes her as a resident of Palghat District. Even her letter dated February 29, 1964, addressed to the Gift-tax Officer, which is appendix " C " to the reference, gives her address as Palghat. All that she wanted in this letter was to transfer the case to Madras City Circle, if the Gift-tax Officer so desired. The power of transferring cases is conferred by section 7A of the Gift-tax Act only on the Commissioner of Gift-tax. Objection to the jurisdiction of the assessing authority was raised only by the applicant; and it was done for the first time before the Appellate Tribunal. It was disposed of by the Appellate Tribunal stating that " the Gift-tax Officer has given a finding in his order to the effect that one of the assessees who filed the gift-tax return was mostly residing at Palghat, which was within his jurisdiction ". This statement would not be fully borne out by the order of assessment which is appendix " D " to this reference. If one of the two persons who are assessed as an association of individuals resides within the area of one Income-tax Officer and the other person resides within the area of another Income-tax Officer, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax v. Laxmidas Devidas and In re Dwarkanath Harisrhandra Pitale. In In re B. N. Elias , 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, an association of persons 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 Commissioner of Income-tax v. Laxmidas Devidas and also in Dwarkanath Harischandra Pitale, In re. In B. N. Elias, In re, 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 partnerships...... When, we find...... that there is a combination of persons formed for the promotion, of a joint enterprise ...... then I think no difficulty arises whatever in the way of saying that ...... these persons did constitute an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, volume 28, para. 315, states that : " It is an excise upon the use made of property, upon the exertion of the privilege of transmitting title by gift." What is important to be noticed in the context of the present controversy is that the tax is charged on a person on the value of the taxable gifts. It is the conveyance of the title that attracts the tax. For a conveyance to be one by an association of individuals, the title they convey must belong to that association. In other words, the 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. We shall also refer to a few more provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction of transfer, namely, say, by one registered deed, the value of the subject-matter of the gift would be the value of the entire property. But, it is equally open to the co-tenants to convey their several shares by different documents, each co-tenant transferring his individual share alone, in which case, the subject-matter of the gift would be the fraction owned by each donor. This would make a great difference in taxation. If, for instance, the property was owned by six persons as tenants-in-common with equal shares, and the value of the entire property is Rs. 30 000, if all the six persons join together in one conveyance, the ' donor ' would be all these six persons put together. They would be a ' person ' within the meaning of this section, by virtue of the definition clause (xviii) which states that ' person ' would include ' a body of individuals '. This ' person ' would be liable to pay tax on Rs. 25,000 (i.e., after deducting the basic exemption of Rs. 5,000). The amount of tax would be Rs. 2,150. If, on the other hand, each one of them separately conveyed by different transfers his or her interest, there would be no liability to tax at all since a gift up to Rs. 5,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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