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TMI Blog1982 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... re therein. Smt. Lilawati Gupta lived separately in one-third portion of the house. Thereafter, in final decree proceedings an advocate was appointed as Commissioner for effecting partition of the property. The Commissioner made an interim report and his final report was awaited. During the pendency of the proceedings, Smt. Lilawati died on 22nd November, 1969. Smt. Lilawati Gupta had executed a registered will on January 31, 1968, by which she bequeathed two-thirds of her share in the disputed property to her daughter, Smt. Vimla Lal, and the balance one-third to her daughter-in-law, Smt. Subhadra Devi, wife of Devraj Gupta. Steps were taken to bring her legal representatives on record in the aforesaid proceedings. The genuineness of the will was challenged by Hans Raj Gupta. Pending those proceedings, Smt. Subhadra Devi also died and her two sons, Premraj Gupta and Pradeep Kumar Gupta, were brought on record as her legal heirs. Ultimately a compromise was arrived at in these proceedings on December 15, 1970, and a decree was passed in the suit in accordance with that compromise. A copy of the compromise is annex. and a copy of the decree is annex. D to the statement of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. It was, however, provided that in case these parties paid liquidated damages amounting to Rs. 1,38,000 and Rs. 46,000, respectively, within a period of six months from the date of the compromise, Smt. Vimla Lal will not be entitled to have the transfer and/or the possession of the said respective built up areas. Admittedly, the proposed multi-storeyed building did not come up and the payments of these two amounts were made as stipulated. It would thus be seen that the assessee, Smt. Vimla Lal, received sum of Rs. 2,10,000 (Rs. 1,57,500 from Sri Hans Raj Gupta and Rs. 52,500 from Sri Premraj Gupta and Sri Pradeep Kumar Gupta) by way of compensation for loss of residence and Rs. 1,84,000 (Rs. 1,38,000 from Sri Hans Raj Gupta and Rs. 46,000 from Premraj Gupta and Pradeep Kumar Gupta) by way of liquidated damages in full satisfaction of her claim. The total amount thus received by her during the previous year relevant to the assessment year 1971-72 came to Rs. 3,94,000. The ITO was of the view that the relinquishment by the assessee of her share in the disputed property which had been bequeathed to her under the will by her mother amounted to a transfer of a capital asset within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e death of Smt. Lilawati Gupta and Smt. Subhadra Devi the property was held by the assessee, her two brothers and nephews as co-owners " and " as it was considered impracticable and inexpedient to divide the property by metes and bounds owing to practical difficulties, it was decided by this body of individuals owning the property to hand over the property in equal shares to Hans Raj Gupta on the one hand and Devraj Gupta and his sons on the other and pay the value of her share in the property to Smt. Vimla Lal. In other words, what was given to the assessee was only the monetary value of her share in the property instead of partition of the property which, in the circumstances of the case, it was not practicable to carry out ". Another finding recorded by the Appellate Tribunal is that these co-owners did not constitute " an association of persons " but constituted a body of individuals owning the property, and " the expression contained in s. 47(ii) of the Act would apply to the above distribution ". Accordingly, the Appellate Tribunal excluded the aforesaid amount of Rs. 60,180 from out of the total income of the assessee for the year under consideration. Now, at the instance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution of capital assets on the dissolution of a firm, body of individuals or other association of persons. " Though, on behalf of the assessee, cl. (i) aforesaid was also referred to before the AAC, it does not appear to have been pressed before the Appellate Tribunal and the case was confined to the application of cl. (ii) only. Under this clause what is required to be shown is that there was a distribution of capital assets and such distribution was occasioned by the dissolution of a firm, body of individuals or other association of persons. In other words, the two essential conditions for the application of this provision are the distribution of the capital assets of the firm, body of individuals or other association of persons and this should have been occasioned by the dissolution of such firm, body of individuals or other association of persons. We have to see whether these conditions were fulfilled in the present case. As noted above, in the suit for partition the disputed property had been held to be joint property of the mother and her two sons. A preliminary decree had been passed and final decree proceedings were pending. In those proceedings the Commissioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of her brother and nephews. It is not known how this property was ultimately partitioned between those persons. Anyhow it cannot be said to be a case of distribution of capital assets. It is clearly a case of relinquishment or extinguishment of the rights of the assessee in the disputed property. Now, we come to the other condition and it is to be seen whether these co-owners constituted a body of individuals. The question arises as to what is meant by " a body of individuals " ? Section 2(31) of the Act defines the expression " person ". Sections 4 and 5, which are charging sections, levy tax on every person and " person " as defined in sub-s. (31) of s. 2 includes: 1. an individual; 2. a Hindu undivided family; 3. a company; 4. a firm; 5. an association of persons or a body of individuals whether incorporated or not; 6. a local authority, and 7. every artificial juridical person, not falling within any of the preceding sub-clauses. Thus there are seven units of assessment under this Act. It would be seen that the words " body of individuals " are placed in the same sub-clause in juxtaposition with " association of persons ". Such was not the position in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with an object to produce income. Such combination should be voluntary and even minors can become members of an association through their guardian if the guardian gives his consent for the said purpose. In the case of co-owners of property if their shares are not definite or ascertainable they may be assessable as an association of persons, but if the shares are definite and ascertainable, mere co-ownership is not sufficient to constitute an association of persons. The question is whether the expression " body of individuals " requires any different test. In Ramanatha Aiyer's Law Lexicon, at p. 144, the meaning of the word " body " has been given as follows: " A number of individuals spoken of collectively, usually associated for a common purpose, joined in a certain cause, or united by some common tie or occupation ; as, a legislative body, the body of the clergy a body corporate. " The Madras High Court in CIT v. Deghamwala Estates [1980] 121 ITR 684, after noting this definition of " body while interpreting the phrase "body of individuals " observed (p. 691) "Thus, the above meaning of the word, ' body ' would require an association for some common purpose or for a commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of s. 2(31)(v) qua this property and further it was not a case of distribution of capital assets belonging to any body of individuals occasioned by the dissolution of that body of individuals. None of the two conditions required by the provision, therefore, was satisfied in this case and the view taken by the Appellate Tribunal to the contrary is erroneous in law. The matter may be viewed from another view-point, and it is, that s. 26 of the Act, which provides for property owned by co-owners, specifically lays down that where property consisting of building or building and lands appurtenant thereto 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 each co-owner must be assessed individually in respect of his share of the income. A fortiori such co-owners cannot be assessed in respect of their income from house property as a body of individuals also and s. 47(ii) of the Act will not be attracted. Our answer to this question, therefore, is that the Appellate Tribunal erred in holding that the disputed transaction is exempted from levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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