LexG. MURUGESAN & BROS. versus C.I.T. , MADRAS
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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[ '
515.
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G. MURUGESAN & BROS .
v.
I .
. '
C.I.T., MADRAS
February 8, 1973
[KS· JlEGDE, P: J~G~NMOHAN REDDY AND H. R. KHANNA, JJ.]
Jncome-ta.~-·Assocwtton.
1
of. Pcrds~ns'-
1
What constitutes-Volition on
I ,
f members an essentm mgre tent- n case of realisation of divl-
par~ 0 there is · no' act of management-The statement of members that
~I ~ad s/arted tfrawing dividends Separately must be accepted in abse11ce
~~~acts. to the conrrt~'-Tircy must be asses.red as 'Individuals.'
F~r the years 1957-58, to 19.62~63 the assessee,s were assescd by the.
Jocome·tax Officer as an Association of Persons. They bad filed their
returns for the first two of these years as 'Association of persons' but jn
!959-60 they claimed that they had di~·idcd their interest in the shares
(
held by ~hem and therefore· in respect of them they should be thereafter
assessed as 'Individuals' •. The Appellate Assistant Commissioner upheld
the order of the Income-tax Officer. The Tribunal however held that the
assessecss should be assessed as 'Individuals' and not as Association of
Persons'. The Hjgh Court in reference answered in favour of the Revenue.
D ln appeal by c'ertificate it was urged on behalf of the assessees appcllant3
that the facts that a joint gift of shares was made in favour of more than
ooo pcrsor. or those shares were registered jointly in
their names
or
even the fact that the clividcnG was realised together did not go to show
tlut the stmrc-hoklcr' or the beneficiaries did act as an 'Association of
Perr.ons.'
HELD: (i) For forming on 'Assoc'iation of Persons' the rnembers of
the association must join together for the purpose of producing ~teome.
~- ·~ssociation of Per..ons' can be formed
only when two or mor.:
md!~tdu~ls voluntarily combine together for a certain purpose. Hence
~oiJllo~ on the. part of the members of the association is an essential
lngrcdtcnt.
{519F·G]
~~ the case of receiving diviJ.::nd~ from shares where there is no
r ~ueshon of any management it is difticult to draw an inference that
J0 or more shareholders fun~t ioned 11s un 'Association of Persons', from
cef mere f~c~ that they jointly own one or more shares and jointly re-
ve the dtvH!eods declared. These circ'Umstances do not by themselves
go 10 Lhow that they acted liS an 'Association of Persons'. [5l9G·H1
i!. (ii) For the years 1957·58 and 1958-59 the usscssccs were rig~tly
\\b~sed as an 'Association of Persons' because of their own admisston
G
fc~. was an import.ant piece of cvid.:nce. [519H; 5:!0A-BJ
tn}1") For the years 1959-60 and 1962-63 they ha.J s~:citk':llly s!at.:d
the they were no more functioning a! an 'A~sociation of rcrsons • In
to
~~'>e of an •Association ol Persons' It is always open to rts ~embers
l ~thdraw from the same No one' can b., compcl!t:d to co!"ll!lue a.s
P<tti ~her of an association.
For withdrawing from an assocratao:n no
•'\! ilr form n<.'(!d be obs~rved. (520C-D]
11 Ir ~~~ ti~.P~esent C'ase the question rdat~d. only hto rea!isa:~lis~f t~i:/~&~:
<lends as r.vr~~l member.s of the assocratton c oose_. ~ion The assese~·
a~rr
lndJ\rJual!l there is an cnJ of the as.~o~.:ta • : •
I
'tv
rernai~~ t~at tbbey had realised their ~iviJcnJd~ inothcefh~lrdicl~i~~ Nd'n~clof
unrc ul!ed. There was notlung to tspr v
·
t. .
\
- ~· ,
516
SUPREME COURT REPORTS
(1973] 3S.C.R.
the facts proved could be said to be inconsistent with the claim made
by them.
[5200-EJ
The answer, therefore, in respect of the years 1959-60 to ·t962-63
must be i,h favour of the assessees. [521C·DJ
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 685 to
690 of 1970.
.
Appeals by certificate from the judgment and order dated 27th
June 1968 by the Madras High Court at Madras in Tax case
No. 308 of 1964.
M. C. Setalvad and T. A. Ramachandran, for the appellant.
B
N, D. Karkhanis, S; P. Nayar and R, N. Sachthey, for the res-
C
pondents.
The Judgment of ·the Court was. delivered by
HEGDE, J.
These are connected appeals by certificate.
They
are directed against the decision of the High Court of Madras in a
\{eference under Section 66 ( 1) of the Indian Income-Tax Act,
D
1921. (to be hereinafter referred to as the Act) .
The question of law referred for ascertaining the opinion of
the High <::ourt was :
.
.
"Whether on the facts and in the circumstances of
the case, the Department was justified in assessing the
assessee in the status of an Association of Persons?"-
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