Case: Commissioner Of Income- Tax, Bombay Vs. Smt. Indira Balkrishna

2. The short facts are these. One Balkrishna Purshottam Purani died on November 11,He left behind him three widows and two daughters. The three widows were named Indira, Ramluxmi and Prabhuluxmi. These widows as legal heirs inherited the estate of the deceased, which consisted of immovable properties situate in Ahmedabad, shares in Joint Stock Companies, money lying in deposit, and share in a registered firm. For the two assessment years 1950-51 and 1951-52 (the corresponding account years being the Sambat years 2005 and 2006) the Income-tax Officer issued notices to the legal heirs of Balkrishna Purushottam Purani. Pursuant to those notices, returns were filed under the heading. "Legal heirs of Balkrishna Purushottam Purani", in one case and in the name of the estate of Balkrishna in the other; the status was shown as "individual" in one case and "association of persons" in the other. They were signed by Indira, one of the three widows. For the assessment year 1950-51 the total income was shown as under-PropertyRs. 11,011Share from registered firmRs. 4,071DividendsRs. 51,796InterestRs. 22,343Ground rentRs. 125TotalRs.the assessment years 1951-52, the total income was shown as-PropertyRs. 10,879Share from registered firmRs. 460DividendsRs. 80,426Interest on depositsRs. 536Ground rentRs. 125TotalRs.both years the Income-tax Officer took the status of the assessee as an "association of persons" and on that footing made two assessment orders. There was an appeal to the Appellate Assistant Commissioner, and two of the points taken before him were - (a) that the three widows ought to have been assessed separately and not as an "association of persons", and (b) that in any event, the income from property ought to have been assessed separately in the hands of the three widows by reason of the provisions in S. 9(3) of the Income-tax Act, 1922. The Appellant Assistant Commissioner rejected point (a) but accepted point (b). then, there was a further appeal to the Income-tax Appellate Tribunal, Bombay. The Tribunal held that the entire estate of deceased Balkrishna Purushottam Purani was inherited and possessed by the three widows as joint tenants and its income was liable to be assessed in their hands in the status of an association of persons. The Tribunal further held that the Appellate Assistant Commissioner was wrong in holding that the shares of the three widows were definite and determinable and S. 9(3) was applicable. The assessee then moved the Tribunal to refer certain questions of law which arose out of its orders to the High Court of Bombay. The Tribunal referred four such questions, but we are now concerned with only one of them, viz., question No. 3 which was in the following termsWhether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessment made on the three widows of Balkrishna Purushottam Purani in the status of an association of persons in legal and valid in law?"Two references were made to the High Court in respect of the orders passed for two assessment years and they gave rise to Income-tax Reference Nos. 52 and 53 ofThe leading judgment was given in I.T.R. 52 of 1955. The High Court held that the Tribunal was in error in coming to the conclusion that the three widows could be assessed in the status of an association of persons with regard to the income which they earned as heirs of their deceased husband. Therefore, it answered question No. 3 in the negative. The department represented by the Commissioner of Income-tax, Bombay, then applied to this Court and obtained special leave to appeal from the judgment, and orders of the High Court of Bombay in the two References. These two appeals have been filed in pursuance of the special leave granted by this Court. The appellant is the Commissioner of Income-tax, Bombay and the assessee is the respondent.

Reasoning: The High Court, however, rightly pointed out that the only property which the widows could have managed jointly was the immovable property which fetched an income of about Rs. 11,000/-, and as to that property, the Appellate Assistant Commissioner had held that S. 9 (3) applied. There was no appeal by the Department against that finding and it was not open to the Tribunal to go behind it. Even on merits the Tribunal was wrong in thinking that the respective shares of the widows were not definite and ascertainable. They had an equal share in the income, viz., one-third each, and the provisions of S. 9(3) clearly applied in respect of the immovable property.5. With regard to the shares, dividends, and interest on deposits there was no finding of any act of joint management. Indeed, the main item consists of the dividends and it is difficult to understand what act of management the widows performed in respect thereof which produced or helped to produce income. On the contrary, the statement of the case shows that the assessee filed lists of shares copies whereof are marked annexure C and form part of the case, which showed that the shares stood separately in the name of each one of the three widows and this was not denied by the Department.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 of them and of what nature, are necessary to come to a conclusion that there is an association of persons within the meaning of S. 3; it must depend on the particular facts and circumstances of each case as to whether the conclusion can be drawn orhave indicated above what is the crucial test in determining an association of persons within the meaning of S. 3, and we are of the view that the test suggested by learned counsel for the appellant are neither conclusive nor determinative of the question before us.12. Coming back to the facts found by the Tribunal, there is no finding that the three widows have combined in a joint enterprise to produce income. The only finding is that they have no exercised their right to separate enjoyment, and except for receiving the dividends and interest jointly, it has been found that they have done no act which has helped to produce income in respect of the shares and deposits. On these findings it cannot be held that the three widows had the status of an association of persons within the meaning of S. 3 of the Indian Income Tax Act.