Case: Commissioner of Agricultural Income Tax, Hyderabad Vs. Rajan Ratan Gopal

is more comprehensive than the word "individual". But the meaning given to that expression as a unit of assessment under the Indian Income-tax Act by the court will equally apply to the expression "association of individuals" under the Hyderabad Agricultural Income-tax Act. This court in Commissioner of Income-tax v. Indira Balkrishna construed the said expression used in the Indian Income-tax Act and held that it did not apply to co-widows of a Hindu in the circumstances of that case. There three co-widows succeeded as co-heirs to the estate of their deceased husband and took a joint tenancy with the right of survivorship and equal beneficial enjoyment. They were entitled as between themselves to an equal share of the income. Either of them could not enforce an absolute partition, though for the purpose of convenience of enjoyment they could divide the property and enjoy their respective shares of the income therefrom. The question arose whether they should be assessed as individuals or as an association of persons. Das J. speaking for the court, accepted the following test to ascertain whether two or more persons constituted an "association of individuals" within the meaning of the Income-tax Act: "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."5. The learned judge then gives the caution that there is no formula of universal application and that the question must depend on the particular facts and circumstances of each case. On the facts found in that case, the court held that the widows were only co-heirs of the estate of the deceased husband and that they could not be assessed as an association of persons within the meaning of section 3 of the Indian Income-tax Act. This court again in Mohamed Noorullah v. Commissioner of Income-tax considered the question in the context of an income realized by receivers appointed by consent of the heirs to run the business of the deceased, Khan Sahib Mohamed Oomer Sahib. Kapur J., speaking for the court, laid down the same test accepted by this court in the earlier judgment and held that on the facts of that case the co-heirs, who carried on the business by consent as one unit, formed an association of persons within the meaning of section 3 of the Indian Income-tax Act, for the purpose of producing income, profits or gains. The said decisions laid down the test that, to constitute an association of individuals two or more individuals should have joined in the promotion of a joint enterprise with the object of producing income, profits or gains.6. In the present case, the said test is not satisfied. The four nephews of Raja Khaja Pershad succeeded to the estate as co-sharers and each one of them was entitled to 1/4 share of the income from the estate. They did not form a unit for the promotion of any joint enterprise to earn income, profits or gains. The collection of the entire income from the estate by one of the sharers or even by a common employee will not make that income an income from a joint venture. Each of the sharers gets his income as an individual and not as an association of individuals. In this view, the High Court was right in answering the first question in favour of the respondentThere are no merits in the second contention either. The question is whether the assessee is entitled to a deduction under section 6(e) of the Act in respect of the expenditure incurred by him for the maintenance of the palace and other buildings of the estate. Learned Additional Solicitor-General contends that by reason of section 51 of the Act the respondent would not be entitled to any deduction under section 6(e) of the Act. It is not clear from the record when the assessment was completed. We shall assume that it was completed before April 1, 1950. Section 51(3) of the Act reads : "Where the assessment of the income-tax payable by an assessee for the year 1359F. under the said Act has not been completed before the 1st day of April, 1950, the tax so payable shall be assessed in accordance with the provisions of the said Act on the assessees agricultural income as defined in this Act of the previous year as determined under the said Act, and appeals from, and all other proceedings arising out of the assessment shall be regulated by this Act."7. This section cannot have any application for the assessment in question, for it was completed before April 1, 1950. The assessment has to be made under the Act and the respondent would be entitled to deductions under section 6(e) of the Act.That apart, even if the assessment was not completed before April 1, 1950, the respondent would not be in a worse position, for there is a corresponding provision in the Hyderabad Income-tax Act, 1357F., which entitles the respondent to the said deduction. Section 14(5)(a) of the said Act allowed the following deduction from the income"all such expenditure, not being in the nature of capital, private or personal expenditure, incurred by the assessee in connection with land or its inhabitants for administration or on works of general improvement and benefit."This court in construing the said provisions held that the expenditure incurred in connection with the land and its administration was deductible under the said provision : see Rajah S. V. Jagannath Rao v. Commissioner of Income-tax. Whether section 6(e) of the Act applies or section 14(5)(a) of the Hyderabad Income-tax Act, 1357F., applies, the respondent would be entitled to a deduction from his income of the expenditure incurred by him for the maintenance of the palace and other buildings of the estate. The answer given by the High Court to the second question is also correct.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]A combined reading of these two provisions indicates that assessment can be made on an individual or an6. In the present case, the said test is not satisfied. The four nephews of Raja Khaja Pershad succeeded to the estate asand each one of them was entitled to 1/4 share of the income from the estate. They did not form a unit for the promotion of any joint enterprise to earn income, profits or gains. The collection of the entire income from the estate by one of the sharers or even by a common employee will not make that income an income from a joint venture. Each of the sharers gets his income as an individual and not as anIn this view, the High Court was right in answering the first question in favour of the respondentThere are no merits in the second contentionis not clear from the record when the assessment was completed. We shall assume that it was completed before April 1, 1950. Section 51(3) of the Act reads : "Where the assessment of thepayable by an assessee for the year 1359F. under the said Act has not been completed before the 1st day of April, 1950, the tax so payable shall be assessed in accordance with the provisions of the said Act on the assessees agricultural income as defined in this Act of the previous year as determined under the said Act, and appeals from, and all other proceedings arising out of the assessment shall be regulated by this Act."7. This section cannot have any application for the assessment in question, for it was completed before April 1, 1950. The assessment has to be made under the Act and the respondent would be entitled to deductions under section 6(e) of the Act.That apart, even if the assessment was not completed before April 1, 1950, the respondent would not be in a worse position, for there is a corresponding provision in the HyderabadAct, 1357F., which entitles the respondent to the said deduction. Section 14(5)(a) of the said Act allowed the following deduction from the income"all such expenditure, not being in the nature of capital, private or personal expenditure, incurred by the assessee in connection with land or its inhabitants for administration or on works of general improvement and benefit."This court in construing the said provisions held that the expenditure incurred in connection with the land and its administration was deductible under the said provision : see Rajah S. V. Jagannath Rao v. Commissioner ofWhether section 6(e) of the Act applies or section 14(5)(a) of the HyderabadAct, 1357F., applies, the respondent would be entitled to a deduction from his income of the expenditure incurred by him for the maintenance of the palace and other buildings of the estate. The answer given by the High Court to the second question is also correct.