LexTHE COMMISSIONER OF INCOME-TAX, POONA versus BULDANA DISTRICT MAIN CLOTH IMPORTERS GROUP
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• 1 S.C.R. SUPREME COURT REPORTS 181 THE COMMISSIONER OF INCOME-TAX, POONA v. BULDANA DISTRICT MAIN CLOTH IMPORTERS GROUP (J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) Income Tax-Business by group of persons-Profits ascertain- ed and shared on joint basis-If Association of Persons-Indian Income-tax Act, r922 (II of r922), s. J. A scheme for the distribution of cloth was evolved by the Deputy Commissioner of the District who appointed a group of persons as sole agents for the import of cloth from Mills and dis- tribntion of the same to retailers. Though for different periods the group was differently constituted, one of the members, firm 'H' remained a common member. The profits of the business were distributed amongst the members of the group in propor- tion of the capital contributed by them. The Income-tax Officer issued notice under s. 22(4) of the Indian Income-tax Act, and on production of books of account assessed the respondent as an 11Association of Persons". The High Court ¥/as of the opinion, inter alia, that before a group of persons could be called an "Association of Persons" it had to be established that they were in the "nature of partners'', which was not so in the instant case, as the members of the group were appointed by the Deputy Commissioner as importers; the participation of the group could not be held to be of free will but under compulsion and there- fore \hey were not an "Association of Persons" within the meaning of s. 3 of the Indian Income-tax Act. Held, that where a business is carried on and the profits ·ascertained on a joint basis, and then distributed according to the capital contributed by each member of the group, the group is an "Association of Persons'.' and it makes no difference that the scheme which produced profits was at the instance of or under the control of the Deputy Commissioner or that he had appointed the members constituting the group. Commissioner of Income-tax, Bombay North v. Indira Bal- krishna, [1960] 3 S.CoR. 5r3, referred to. Mohamed Noorullah v. Commissioner of Income-tax, [rg6r] 3 S.C.R. 515, relied on. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 41-44of1960. March 6. 182 SUPREME COURT REPORTS [1962] r96x Appeals by special leave from the judgment and Th c --. . order dated April 13, 1956, of the former Nagpur ~ 1;:::';::~"High Court in Misc. Civil Case No. 27 of 1954, Poona K. N. Rajagopal Sastri and D. Gupta, for the appel- v. !ant. Buldana District Main Cloth Iniporters Group J.M. Thakar, S.. N. Andley, Rameshwar Nath, P. L. Vohra and J.B. Dadachanji, for the respondent. 1961. March 6. The Judgment of the Court was delivered by Kapur J. KAPUR, J.-These are four appeals by the Commis- sioner of Income-tax in Income-tax Reference made under s. 66-A(2) of the Income-tax Act (hereinafter termed the 'Act'). The question for decision is whether the respondent is "an association of persons" within the meaning of s. 3 of the Act. The appeals relate to two Income-tax assessments and two Excess Profits Tax assessments; the former for the years 1946-47 and 1947-48 respectively, correspond- ing to the accounting years February 1, 1945, to September 30, 1945, and October 1, 1945, to August 21, 1946, the latter are in regard to chargeable account- ing periods February I, 1945, to September 30, 1945, and October 22, 1945, to March 31, 1946. The decision of the Excess Profits Tax appeals is consequent upon the decision of the Income-tax appeals. The facts may now be stated: In 1945 the Deputy Commissioner of Buldana evolved a scheme for the distribution of cloth in his district and with the sanc- tion of the Government of C. P. appointed four persons, viz., Haji Ahmed Haji Ali & Co., Bhanji Kuwarji, Trimbaklal Tribhovan Das and Deolal Rangulal as sole agents for the import of cloth from mills in various places in India and for distribution of the same to retailers. Two of them Haji Ahmed Haji Ali & Co. and Bhanji Kuwarji carried on the business as from February 1, 1945, to the end of September 1945. The profits of the business in proportion of the capital contributed by these persons were distributed between these two persons. After September 1945 there was a change in the group of importers and some others also joined the group and the profits of .. • .. l S.C.R. SUPREME COURT REPORTS 183 • the subsequent period were similarly distributed 1961 betw~en tdhe mem
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