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TMI Blog1960 (10) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted a one-fourth share. It set out the common liabilities to be met by the entire family estate. It specified certain amounts to be provided for the fourth defendant, the sister of the plaintiffs, both for her marriage and settlement upon her. Several other payments to be made out of the estate were also provided. Clause 6 of the decree directed that the plaintiffs "shall forthwith take possession of all the suit properties........ and manage them as receivers on behalf of the parties and that they shall also manage the salt pans belonging to the devasthanams as it has been administered all these years and that they should discharge and provide for the liabilities mentioned in paragraph 2. ....." Other clauses in the decree directed the plaintiffs as receivers to make certain allowances to the parties, that is, the plaintiffs and defendants Nos. 1 to 4, in specified sums. It is common ground that there were several final decrees in the suit, the first of which was on 27th November, 1951. It effected a division of the salt pans belonging to the family with effect from 1st January, 1952. The second final decree, dated 15th April, 1953, effected a division of the cardamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 25A(1) of the Act. The Assistant Commissioner rejected the plea that the receivers were in possession of the properties on behalf of each and every one of the separated members of the family. A further appeal was taken to the Appellate Tribunal which came to a like conclusion and upheld the assessments in the status of the Hindu undivided family. 4. On an application under section 66(1) of the Act, the following questions have been referred to us : (1) Whether section 41 is mandatory or only an alternative available to the Income Tax authorities in certain special cases ? (2) On a proper construction of annexure "A" and "B" whether the receivers aforesaid can be said to have been appointed by or under any order of court and received the income on behalf of each of the beneficiaries for the aforesaid years as required by section 41, in the absence of the division of the family by metes and bounds as required by section 25A ? (3) Whether the assessment of the family in the hands of the receivers on the income accruing after 6th October, 1948, till 30th June, 1952, in the assessments 1950-51, 1951-52, 1952-53 and 1953-54 are valid ? 5. The three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bounds, he seeks to rely upon the provision in the preliminary decree, which, according to him, practically results in each tenant-in-common receiving his share of the income referable to a definite portion of the family property. He relies upon clause 6 of the preliminary decree which directs the receivers to manage the properties on "behalf of all the parties"; to clause 8, which provides for the payment of monthly allowances to each of the parties and which directs further "at the end of the year, if on looking into the accounts the first defendants one-fourth share of the net income, after payment of interest on all family debts, is in exceed of the aggregate allowance paid to him, he shall receive the excess or repay the overdrawing, if deficit occurs"; and to clause 9 which provides "that the plaintiffs and defendants Nos. 2 to 4 shall have allowances as heretofore viz., plaintiffs and second defendant each ₹ 1,000 per month, third defendant ₹ 500 per month, fourth defendant ₹ 250 per month with conditions similar as in the case of the first defendant." On the basis of these clauses, together with the declaration that each of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw required a division of the properties to be effective so as to bind the members, it did not further require that the property must in every case be partitioned by metes and bounds, if separate enjoyment could otherwise be secured according to the shares of the members. They took into consideration the nature of the asset concerned in the case, which was a managing agency, and held that for an asset of that kind, there was no other mode of partition open to the parties if they wished to retain the property and yet hold it not jointly but in severalty, and that the law did not contemplate that a person should do the impossible. The contention of the Department that it was open to the members of the family to have allotted different managing agencies to different members of the family as a reasonable mode of division consistent with the requirement under section 25A(1) was repelled. The nature of the property was taken into consideration for determining whether the mode of division adopted by the parties fulfilled the requirements of the Income Tax law. 9. We are unable to see how these decisions assist the argument of the learned counsel for the assessee. It is undeniable that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions. In Estate of Khan Sahib Md. Oomer Sahib v. Commissioner of Income Tax the receivers appointed by court pending a suit for partition carried on the business of the deceased owner of the property who died intestate. An assessment was made of the profits of the business in the hands of the receivers on the basis that the profits accrued to an association of persons consisting of the heirs. The decision principally went upon the consideration of what constituted an association of persons. It was held that neither the fact that the heirs inherited the business and owned it thereafter as co-shares in defined shares and the income belonged to the group of heirs with defined share, with the earning of which income they had nothing to do, nor the fact that they were entitled to and did receive their share of the profits, either each separately or both taken together, constituted the an association of persons. It was further decided that to constitute an association of persons as a taxable unit, the objects of the association must be to produce income, profits or gains and that a volition to that effect should proceed from those who formed the association. In that case, it was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of easy management prefer to manage the properties as an association, such a result, viz., the assessment in the status of an association of persons, may be possible. But so long as an actual division has not taken place, section 25A(3) comes into play and cannot be avoided on the basis of any such argument as advanced above. 13. It is next contended that at least in so far as the immovable properties are concerned, there can and should be an assessment on the individual members. The decisions referred to above are relied upon in this regard. Section 9(3) of the Act reads : Where property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with this section shall be included in his total income. 14. The argument is that on and after the passing of the preliminary decree, the respective shares of the members of the family become properties at least should be assessed in the hands of the members individually. It does not appear to us that this provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be done, such as meeting the liabilities of the family debts, making provision for marriages and other expenses, making monthly allowances to the divided members of the family and such other acts. Clearly, then, they were not acting on behalf of each individual member of the divided family but on behalf of what may be called the family estate. The receivers were accordingly appointed for the purpose of receiving the income, profits and gains of the persons, who for purposes of assessment to Income Tax constituted a Hindu undivided family. Despite the disruption in status, the "person" within the meaning of that expression in section 41(1) of the Act whom the receivers represented in this case was that Hindu undivided family. The intervention of persons who were no longer liable to be assessed as a Hindu undivided family but were entitled to be assessed to tax each in his individual status. Section 41(1) in express terms directs that the tax shall be levied on the receivers "in the like manner and to the same amount as it would be livable upon and recoverable from the person on whose behalf such income, profits or gains are receivable." In this case the " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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