Case: M/S. Meera Company,Ludhiana Vs. The Commissioner Of Income Tax,Punjab, J&amp;K And Chandigarh,P

the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. (1a) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate:Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him.Explanation-For the purposes of this sub-section, "maximum marginal rate" shall have the meaning assigned to it in Explanation 2 below sub-section (3) of Section 1 64.(2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that of that income, be assessed under any other provision of this Act". "166. Direct Assessment or recovery not barred. Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income." *It was contended on behalf of the appellant that the minors income had to be assessee. It could not be clubbed with any other income of the mother. Mother was the legal guardian and her personal income must be assessed separately altogether. In view of the provisions of Section 161 it was not open to the Income Tax Officer to tax the income of the minors as well as the mother in the status of "body of individuals". 30. We are unable to uphold this argument. Section 161 is an enabling provision. The charge that is imposed by Section 4 may be computed and recovered in the manner laid do wn in the Act including Section 160, 161 and 166. When the minors along with their mother form a body to generate income, levy of tax under section 4 is on that body. The mother cannot insist that the income of the joint venture must be assessed separately on the minors and her even when a joint business is carried on.The underlying idea behind these sections was explained by Addison, J. in the case of Hotz Trust of Simla v. The Commissioner of Income Tax, Punjab and N 1 Frontier Provinces, 5 ITC 8 at 16. Dealing with the corresponding provisions of the 1922 Act, it was held that where trustees carried on a business under a testamentary trust, the assessment in respect of the business profits should be made not on the beneficiaries in respect of their individual not shares of the profits but on the trustees as an "association of persons". It was observed: "Section 40 is merely a machinery section, making the trustee liable for beneficiaries are difficult or impossible to get at, and where the trustee acts as a conduit-pipe for the conveyance of the income to the beneficiaries. It does not affect the charging sections 3 and 10 of the Indian Act under which the trustees as an association of individuals, carrying on a business, are liable to be assessed in respect of the gains of the business carried on by them. In fact it is clear that this is the only way t hat the profits and gains of the business, carried on by the trustees, can be taxed. For it is obvious that, if what goes to each beneficiary every year only can be taxed, much of the income acquired by the business w ill altogether escape taxation, and that the income received by the beneficiaries is not the true assessable income as many of the expenses incurred by the trustees, which would be paid out before the distribution takes place, would not be admissible under the Act. The profits and gains of this business carried on by the trustees, can only be calculated in the hands of the trustees as such and the assessment in the hands of the beneficiaries would be in reality inconsistent with the intention of the Income-tax Act. The trustees both carry on the business and are in receipt of the profits and it is they who must be taxed under the charging sections." * 31. The full Bench of Madras High Court in the case of J.V. Saldhana v. The Commissioner of Income-tax, Madras 6 ITC 114, reiterated the same principle in a case where a widow with her six minor children succeeded to the estate of her deceased husband consisting of coffee plantations, house properties and a third share in a firm of coffee curers and settlers. The widow continued to carry on the business in the same manner as was done by the deceased. It was held by the Full Bench that when properties of a number of individuals were put together and one business was carried on with the combined resources, it was open to the Income Tax Officer to regard it as one business carried on by an "association of individuals" within the meaning of section 3 of the Act. A single assessment should be made under Section 10(1) of the Income Tax Act on the entire income from the business. It was also held that Section 40 and the following sections were machinery and enabling sections and not charging sections. 32. In our view, these two decisions correctly stated the law under the Act of 1922. These principles will also apply to the corresponding provisions of the Income Tax Act, 1961.

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

Explanation:
0[ds]In this definition, in clause (v), both `association of persons and `body of individuals have been included with the added words "whether incorporated or not". Another thing to note is that clause (v) speaks of "an association of persons or a body of individuals". This implies that an "association of persons " is not something distinct and separate from "body of individuals". It has been added to obviate any controversy as to whether only combinations of human beings are to be treated as a unit of assessment. The intention clearly is to hit combinations individuals and individuals, combinations of individuals and non-individuals and also combinations of non-individuals with other non- individuals who are engaged together in some joint enterprise when such joint enterprise does not fall within any of the other categories enumerated in sub-section (31) of Section 2 of theis of interest to note that the phrase "body of individuals" has been used by the Parliament in a revenue Act even before the Income Tax Act, 1961 was passed. Under the Gift Tax Act, tax was imposed on gifts made in course of every assessment year commencing on and from the first day of April, 1987 at the prescribed rate by athe Indian Income Tax, 1922 `person has been defined to include a Hindu undivided family and a local authority. The object of giving the expanded definition was to cover all entities taxable under the Indian Income Tax Act, 1922 as well as the entities falling within the definition of `person under the General Clauses Act. In other words, the intention of the Legislature was not to limit the charge to certain specified entitiesthe background of these definitions, when several individuals are found to have joined together for the purpose of making profit, the group of individuals may be conveniently described as "a body of individuals". We have seen how the controversy arose under the Indian Income Tax Act as to the meaning of "association of individuals". There was a conflict of opinion on whether `individuals include artificial or non-juridical persons. But there can be no scope of any controversy now. "An association of person" or "a body of individuals", whether incorporated or not, has been brought within the net of taxation. The intention of the legislature is clearly to hit combination of individuals or other persons who were engaged together in some joint enterprise. The combinations of or may not be incorporated. A profit-yielding joint venture has to be taxed as a singlethe case before us, we have a window and her minor sons who are engaged in the business activity which sons who are engaged in the business activity which generates income. It does not make any difference that the window and the minor sons did not start the business. The business was inherited. But the fact that the business has been continued by the widow on her own behalf as well as on behalf of the minor sons after buying the interest of the mother goes to show that there is an organised activity jointly carried on to produce income. It is a clear case of joint business venture of a few individuals. The income of this business has been rightly assessed in the status of a "body of individuals".We are of the view that the High Court has come to a correct decision. It is not necessary to refer to the large number of cases that have been cited before us but it is well settled by this Court under the Act of 1922, by a series of judgments that `association of persons must be an association is also well settled by a number of decision right from the case of Commissioner of Income Tax, Bombay Laxmidas and anotherare unable to uphold this argument. Section 161 is an enabling provision. The charge that is imposed by Section 4 may be computed and recovered in the manner laid do wn in the Act including Section 160, 161 and 166. When the minors along with their mother form a body to generate income, levy of tax under section 4 is on that body. The mother cannot insist that the income of the joint venture must be assessed separately on the minors and her even when a joint business is carried on.The underlying idea behind these sections was explained by Addison, J. in the case of Hotz Trust of Simla v. The Commissioner of Income Tax, Punjab and N 1 Frontier Provinces, 5 ITC 8 at 16. Dealing with the corresponding provisions of the 1922 Act, it was held that where trustees carried on a business under a testamentary trust, the assessment in respect of the business profits should be made not on the beneficiaries in respect of their individual not shares of the profits but on the trustees as an "association of persons". It was40 is merely a machinery section, making the trustee liable for beneficiaries are difficult or impossible to get at, and where the trustee acts as a conduit-pipe for the conveyance of the income to the beneficiaries. It does not affect the charging sections 3 and 10 of the Indian Act under which the trustees as an association of individuals, carrying on a business, are liable to be assessed in respect of the gains of the business carried on by them. In fact it is clear that this is the only way t hat the profits and gains of the business, carried on by the trustees, can be taxed. For it is obvious that, if what goes to each beneficiary every year only can be taxed, much of the income acquired by the business w ill altogether escape taxation, and that the income received by the beneficiaries is not the true assessable income as many of the expenses incurred by the trustees, which would be paid out before the distribution takes place, would not be admissible under the Act. The profits and gains of this business carried on by the trustees, can only be calculated in the hands of the trustees as such and the assessment in the hands of the beneficiaries would be in reality inconsistent with the intention of the Income-tax Act. The trustees both carry on the business and are in receipt of the profits and it is they who must be taxed under the charging sections."full Bench of Madras High Court in the case of J.V. Saldhana v. The Commissioner of Income-tax, Madras 6 ITC 114, reiterated the same principle in a case where a widow with her six minor children succeeded to the estate of her deceased husband consisting of coffee plantations, house properties and a third share in a firm of coffee curers and settlers. The widow continued to carry on the business in the same manner as was done by the deceased. It was held by the Full Bench that when properties of a number of individuals were put together and one business was carried on with the combined resources, it was open to the Income Tax Officer to regard it as one business carried on by an "association of individuals" within the meaning of section 3 of the Act. A single assessment should be made under Section 10(1) of the Income Tax Act on the entire income from the business. It was also held that Section 40 and the following sections were machinery and enabling sections and not chargingour view, these two decisions correctly stated the law under the Act of 1922. These principles will also apply to the corresponding provisions of the Income Tax Act, 1961.