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TMI Blog1979 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... was transferred for consideration which was less than the fair market value of the property and that the consideration for such transfer as agreed to between the parties had not been duly stated in the instrument of transfer and further that such fair market value of the property exceeded the apparent consideration by more than fifteen per cent. of such apparent consideration. The deed of transfer was executed by the transferors in favour of four transferees. Since the two transferors and the four transferees objected to the order of the IAC each one of them filed an appeal. The transfer was of 16 cents of vacant land in survey No. 592/2 of Ernakulam village. This property had been purchased in 1965 by the transferors jointly for a consideration of Rs. 33,000. To make the property purchased regular in shape, they had purchased a further extent of 0.675 square links in survey No. 592/3 on July 16, 1973, so much so the total extent of the land became 16.675 cents. It was the said extent that was sold by them to the four persons. Though the total extent under the documents taken by the joint transferors was 16.675 cents, on measurement it was found to be only 16.268 cents. Out of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed of transfer. It also found that the immovable property covered by each particular sale transaction had to be taken into account independently for the purpose of proceedings under s. 269 of the Act an the question is to whether the fair market value of the property exceeded Rs. 25,000 had to be determined in respect of property covered by each of the four sales. The competent authority having estimated the fair market value only for the entire parcel of land as one unit there was no investigation and recording of finding as to whether each of the plots in the four schedule exceeded in value Rs. 25,000. In this view the Tribunal directed the case to be considered afresh by the competent authority in the light of its findings. Under s. 269H of the Act in appeal lies to the High Court on any question of law against the decision of the Appellate Tribunal under s. 269G Accordingly these appeals have been filed by the CIT. The question of law this court is called upon to decide in these appeal is whether, in the facts and circumstances of the case, where a transfer is seen to be affected of different items of properties in favour of four persons under a deed of transfer, is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies has not been truly stated in the instrument of transfer with such object as is referred to in clause (a) or clause (b) of sub-section (1). " In this case, the property of 16.268 cents covered by the sale deed of August 17, 1973, belonged to the two transfers jointly. They did not sell the whole property to four persons jointly. If they had sold such properties jointly to the four persons, each one of the four would have had right in the entire 16.268 cents, though jointly with the others. Separate portions of the property were sold to the four purchasers and by such sales the entire property was exhausted. Each one of the four transferees had absolute right to the property transferred to him and in the property transferred to one the other transferees had no right. In other words, the right of each one of the transferees to the plot transferred to him was absolute. It was as if four sale deeds had been executed for four different portions of a compact plot and four purchasers took the respective portions transferred to them with absolute right over such portions. We may notice here that there is no case that the transfers in favour of the four purchasers or any of them was sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation of individuals '? In my view, they did. " This definition was adopted by the Supreme Court as reflecting the proper meaning of the term. In CIT v. Indira Balkrishna [1960] 39 ITR 546 the Supreme Court said thus (p. 551) : " It is enough for our purpose to refer to three decisions : In re B. N. Elias [1935] 3 ITR 408 (Cal), Commissioner of Income-tax v. Laxmidas Devidas [1937] 5 ITR 584 (Bom) and In re Dwarakanath Harischandra Pitale [1937] 5 ITR 716 (Bom). In In re B. N. Elias [1935] 3 ITR 408 Derbyshire C.J. rightly pointed out that the word ' associate ' means, according to the Oxford Dictionary, ' to join in common purpose, or to join in an action '. Therefore, an association of persons must be one 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. This was the view ex-pressed by Beaumont C.J. in Commissioner of Income- tax v. Lakshmidas Devidas [1937] 5 ITR 584 (Bom), at page 589, and also in In re Dwarakanath Harischandra Pitale [1937] 5 ITR 716 (Bom). In In re B. N. Elias [1935] 3 ITR 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or gains. This was the view expressed by Beaumont C.J. in Commisioner of Income-tax v. Laxmidas Devidas [1937] 5 ITR 584(Bom) at page 589, and also in In re Dwarakanath Harischandra Pitale [1937] 5 ITR 716(Bom). In In re B.N. Elias [1935] 3 ITR 408 (Cal) Costello J. put the test in more forceful language. He said : " It may well be that the intention of the legislature was to hit combination of individuals who were engaged together in some joint enterprise but did not in law constitute partnerships....When we find... that there is a combination of persons formed for the promotion of the 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 s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be held to constitute as an association of persons or a body of individuals. The GTO assessed them as an association. The AAC upheld the assessment as an assessment on a body of individuals. The Tribunal came to the conclusion that the assessment in question was a valid assessment and it was an assessment on an association. The High Court took the view that the two ladies could be assessed only as individuals. Section 3 of the G.T. Act which is the charging section charges to tax gifts made by a person during the previous year and it was contended that the person who made the gift in the case was an association of persons constituted by two ladies or a body of individuals constituted by two ladies. Considering this question the Supreme Court said thus (p. 830) : " Now the question is in what capacity the gift was made by the assessees. Did they do it as an association or as a body of individuals or as individuals. The property received by the assessees under the will of their mother was admittedly received by them as co-tenants. Each one of them had half share in that property. The question whether they divided that property or not is not a material question. In law each one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one agreement preceding the transfer, (3) one of the brothers alone paid the advance, (4) only one deed of sale was executed, (5) after the purchase the entire property was levelled up and pile driving commenced before the purchase was completed and (6) such pile driving was only for construction of one building. We are not at the question here whether the property purchased by the four brothers were put to common use in a joint venture for deriving income as an association of persons. Possibly if the income out of the venture they embarked upon later is sought to be assessed as that of an association of persons the question may become relevant. We are at the question whether the purchase is by an association of persons and not whether an association of persons came into existence after the purchase to run a joint venture. We have already indicated the elements required to find a combination styled " association of persons ". Some element of volition is necessary even for " a body of individuals ". What exactly would be the distinction between " a body of individuals " and " an association of persons " is a matter on which we need not speak further, for, that may not be relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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