9911796707
TMI Blog1995 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... these persons offered the respective shares for tax purposes. The Income-tax Officer was of the view that the entire assessment should be made as a single assessment on an association of persons. Accordingly, the assessment was made in the status of association of persons. On appeal the Appellate Assistant Commissioner found that they came together through an accidental union and there was no conscious and stable relationship expected of an association. Accordingly, the Appellate Assistant Commissioner set aside the assessment made in the status of association of persons. As against this order, the Department filed an appeal before the Appellate Tribunal. The Tribunal dismissed the Departmental appeal holding that the mere agreement to share the prize money for a consideration being a single activity for the purposes of sharing a chance prize would hardly constitute an association of persons. The Tribunal pointed out that the scheme of the Act is to tax individuals and not to club the incomes of different persons except under conditions prescribed under section 64 of the Act. According to the Tribunal in order that an association or body of individuals is assessed there should be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a lottery cannot be equated to produce the income. Learned counsel appearing for the assessee also relied upon certain decisions in order to support his contentions. We have heard the rival submissions. The fact remains that one Arumugham Chettiar who was working in a cycle shop on daily wages of Rs. 2 purchased a lottery ticket for Rs. 2. He agreed to share 25 per cent. of the prize money with one O. K. Ramaswamy Chettiar as he was in need of 50 paise for the next meal. The agreement was reduced into writing. The ticket earned a prize of Rs. 17,85,000. According to the Department, both the individuals formed an association of persons for producing this lottery winning income. Hence, the winning of the lottery is to be assessed in the status of association of persons. In the case of G. Murugesan and Brothers v. CIT [1973] 88 ITR 432, the Supreme Court has held as under : "The expression 'association of persons' is not a term of art. That expression has come up for consideration before this court in more than one case. In CIT v. Indira Balkrishna [1960] 39 ITR 546, this court, after referring to the various judgments, observed thus : 'It is enough for our purpose to refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of persons' as used in section 3 of the Income-tax Act, means an association 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". A similar question came up for consideration before the Punjab and Haryana High Court in the case of CIT v. Smt. Saraswati Bai [1982] 137 ITR 656. According to the facts arising in this case a piece of land was purchased by three ladies jointly and subsequently resold. Profit on the sale of land was included in the individual returns of the ladies as capital gains and assessed as such. Subsequently, the Income-tax Officer issued a notice of reassessment on the ground that the assessees constituted an association of persons and the transaction amounted to an adventure in the nature of trade. While considering these facts, the Punjab and Haryana High Court held that "there was evidence on which the Tribunal had arrived at a positive finding on fact that the assessee did not constitute an association of persons and that transaction did not amount to an adventure in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 65,00,000 paid for the transfer. The entire property was divided into eight plots. Since there was disagreement between the seller of the lands and the purchasers, the 65 co-owners became the direct lessors, since the lands were let out to Kiran Constructions. The rent received by them was said to be assessed in the status of association of persons. The Bombay High Court held that since they are co-owners they cannot be assessed in the status of association of persons, since they are already having interest over the immovable property. Therefore, on the facts this decision would also be not helpful for the purpose of making a decision in the present case. Learned senior standing counsel heavily relied upon a decision of the Andhra Pradesh High Court in CIT v. Friends Enterprises [1988] 171 ITR 269. According to the facts arising in that case a return was filed by the assessee in the status of a registered firm for the assessment year 1973-74 showing an income of over Rs. 1 lakh on total winnings. It was claimed that a partnership had been formed consisting of five persons. The five persons had agreed to contribute equal sums of Rs. 200 each. The amount would be invested ..... X X X X Extracts X X X X X X X X Extracts X X X X
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