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TMI Blog1984 (1) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... al during the assessment years 1969-70 to 1976-77. His father, Sri J. P. Srivastava, who died on December 15, 1954, made a gift during his lifetime to the former and to his grandson, Sri V. K. Srivastava. These amounts were invested and the income therefrom was held by the AAC in the appeals for the assessment years 1954-55 and 1956-57 to belong to an association of persons, where the shares of the members were indeterminate and therefore, liable to tax at the maximum rate and for the subsequent assessment years, both according to the income-tax return and the incometax assessment, the income from these assets was assessed in the status of an association of persons, where the shares of the members of the association of persons were not determinate. In the wealth-tax assessment of the respondent-assessee, Sri J. K. Srivastava, the WTO included half share of the said assessee in the association of persons consisting of the said assessee and his said son to whom, as stated above, gifts had been made by the late Sri J. P. Srivastava during his lifetime. The other half share in the said association of persons was presumably included in the assessment of Sri V. K. Srivastava, the son o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court or the Tribunal. The learned counsel for the Department contended that the two questions whose reference has been sought in the instant application under s. 27(3) are questions of law. He further contended that it will not be correct to say that the controversy had become irrelevant or the answer to the same was self-evident. He placed reliance on a Division Bench decision in Prem Lata Agarwal v. CWT [1983] 142 ITR 586 (All), and contended that in somewhat similar facts where also a gift had been made to two donees, the Department was held justified in including 50 per cent. share in the gifted amount on the footing that this was the value of the share of the assessee in the association of persons which was formed by her along with her son, to whom the gift had been made. Lastly, the learned counsel for the Department contended that the interpretation, if any, was placed by the Board in its circular in question, the same was not binding when the matter was in controversy in a court of law. He placed reliance on the following observations made by the Supreme Court in Gestetner Duplicators P. Ltd. v. CIT [1979] 117 ITR I (p. 13): " Turning to the circular dated January 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the provisions of this Act, including the provisions relating to the levy of penalty or any other sum chargeable under any provision of this Act, so far as may be, shall apply to such assessment. (3) Without prejudice to the generality of the provisions of sub-section (2), if the Wealth-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act in respect of any such association of persons as is referred to in subsection (1) is satisfied that the association of persons was guilty of any of the acts specified in section 18 or section 18A, he may impose or direct the imposition of a penalty in accordance with the provisions of the said sections. (4) Every person who was at the time of such discontinuance or dissolution a member of the association of persons, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum. (5) Where such discontinuance or dissolution takes place after any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to wealth-tax are held by an association of persons (other than a company or a co-operative society) and the individual shares of the members of the said association in the income or the assets of the association on the date of its formation or at any time thereafter, are indeterminate or unknown, wealth-tax will be levied upon and recovered from such association in the like manner and to the same extent as it is leviable upon and recoverable from an individual who is a citizen of India and is resident in India at the rates specified in Part I of Schedule I or at the rate of 3 per cent., whichever course is more beneficial to the Revenue." Mr. Dhawan's contention, in effect, is this : It was realised that the share of a member in an association of persons where it is unspecified and indeterminate could not be brought into the wealth-tax assessment of an individual assessee, in view of the cumulative effect of s. 4(1)(b) read with rule 2 of the rules framed under the Act. The association of persons, as such, was not an assessable entity and, therefore, such share escaped wealth-tax assessment prior to April 1, 1981. Section 21 AA sought to plug this loophole by enabling the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of a gift made to two persons forming an association of persons, it is permissible to the Department to proceed on the presumption that each member has an equal share in such gift. It is not necessary for us to say at this stage as to which interpretation which is being placed upon s. 4(i)(b) read with rule 2 and the aforesaid circular of the Board is correct-whether the interpretation placed by the Department or by the assessee. In an application under s. 27(3), the limited task is to decide whether the question of law does or does not arise and whether it needs to be referred to this court for its answer. Sri Dhawan sought to distinguish the decision in Prem Lata Agarwal v. CWT [1983] 142 ITR 586, on certain grounds. He also submitted that the circular in question has not been noticed in the said decision and similarly, the enactment of s. 21AA was not noticed in the said decision. We would not like to make any observation which might constitute in any manner as expressive of our agreement or disagreement with the said decision. That would not be correct to do so. However, it does seem to us that in the said decision, the controversy which is at hand here was treated to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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