9911796707
TMI Blog1981 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... " The relevant assessment years are 1973-74 and 1974-75. The assessee, an individual, was previously assessed in the status of an HUF in respect of the share income earned by the joint family from a firm known as M/s. Sri Narayan Bastralaya. The previous year for the assessment year 1973-74 was the calendar year 1972 ending on December 31, 1972. On December 31, 1971, there was a partial partition in the HUF in respect of the interest of the family in the firm and as a result of such partition, each of the seven members of the family got 1/7th share in the hitherto HUF interest in the firm. In the course of the assessment for 1973-74, claim for partial partition was made and the ITO accepted the claim by passing an appropriate order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the status of AOP. The revenue thereupon appealed to the Tribunal and maintained that the seven members of the erstwhile family formed an AOP after the partition, inasmuch as they allowed their individual shares to continue as before in the firm and had also decided to distribute the profits among themselves after they were received by Nepak. The Tribunal accepted the contention of the revenue and held : " .. ...... The arrangement was that the seven members voluntarily agreed to allow their individual funds to remain invested in the aforesaid firm with a view to earn profits therefrom and when profits were so earned to divide them equally amongst themselves. To our mind, the arrangement entered into by the seven members of the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al sense, but must be construed in their plain, ordinary meaning. When there is a combination of persons formed for the promotion of a joint enterprise, or otherwise stated, when co-adventurers are banded together for a common action, they are treated as an AOP when they do not constitute in law a partnership. Where the income does not result from any joint venture or joint act, assessment in the status of an AOP would no be justified : See CGT v. R. Valsala Amma [1971] 82 ITR 828 (SC). In order to constitute an "AOP", the persons must join in a common purpose or common action and the object of the association must be to produce income and it is not enough that the persons received the income jointly. In the case of Commr. of Agrl. LT. v. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven members. There is no clear finding as to the existence of an agreement to carry on joint venture nor has it been found as a fact that though the accounts stood in the name of Narayan Nepak, the other six had as a fact joined in the venture. At the most, on the finding the position seems to be that the collection of the entire income which has been assessed was by Narayan Nepak as in previous years. From that fact alone, as pointed out in the case reported in Commr. of Agrl. LT. v. Raja Ratan Gopal [1966] 59 ITR 728 by the Supreme Court, there can be no presumption of a joint venture. On the material on record, therefore, the conclusion of the Tribunal that the assessee had been rightly treated as an AOP is not sustainable. Counsel pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombination 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 association ...... .' We think that the aforesaid decisions correctly lay down the crucial test for determining what is an association of persons within the meaning of section 3 of the Income-tax Act, and they have been accepted and followed in a number of later decisions of different High Courts to all of which it is unnecessary to call attention. It is however, necessary to add some words of caution here. There is no formula of universal application as to what facts, how many of them and of what nature, are necessary to come to a conclusion that there is an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the seven persons of the erstwhile joint family became owners of the capital that lay to the credit of the HUF which alone was the partner previously, but there is no clear finding with reference to the agreement entered into among them that they had any joint enterprise to undertake. In on; view, on the facts found, the AAC was justified in holding that the status of the assessee was not an AOP and unless a clear finding came to satisfy both the tests, the Tribunal had no justification to reverse the finding of the AAC and restore the status of the assessee to that as determined by the ITO. Our answer to the question referred, therefore, is: On the facts and in the circumstances of the case, the Appellate Tribunal is not justified i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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