Commissioner of Income Tax vs V. Pattabhiraman

M.N. Chandurkar, C.J.—The question referred to this court for opinion at the instance of the Revenue reads as follows :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the property at No. 29,

General Muthiah Mudali Street, Madras, was enjoyed by the four brothers as tenants-in-common, that each of the four co-owners should be

assessed in respect of their share of capital gains and that the adoption of the status of ''body of individuals'' in respect of the assessment of capital

gains was not correct ?

On hearing learned counsel for the Revenue, we are satisfied that the question referred in this reference has to be answered against the Revenue

in view of the decision of this court in Commissioner of Income Tax Vs. Deghamwala Estates, . In that decision, this court has taken the view that

the mere execution of a document of sale by two or more persons who are co-owners of the property cannot lead to the conclusion that the co-

owners were a body of individuals and that there must be something more than joining together and executing the document. This court pointed out

that the mere collection of individuals without a common tie or common aim cannot be taken to be a body of individuals falling within section 2(31)

of the Income Tax Act, 1961.

In the instant case, the four co-owners had become owners of a property as a result of the two original owners, Krishnaveni Ammal and

Chempakalakshmi Ammal, who were the daughters of one Munuswamy Chetty, who was the original owner of the property, surrendering their life

interest in favour of the four grandsons of Munuswamy Chetty, that is, two sons each of Krishnaveni Ammal and Chempakalakshmi Ammal. These

four co-owners, who had become absolute owners of the property by virtue of the surrender of the life interest by their respective mothers by

deeds dated March 26, 1956, had sold the property because, out of the three vendors, only one vendor was residing at Madras, and the other

vendors were residing outside Madras, and these vendors found it inconvenient and difficult to own and enjoy the said property in common. A

finding has been recorded by the Tribunal that apart from this transaction concerning this property, there was no other activity which was jointly

undertaken by the four co-owners with a view to earn any income.

Learned counsel for the Revenue has referred us to the decision in N.P. Saraswathi Ammal and Others Vs. Commissioner of Income Tax,

Madras, . A careful reading of that decision will show that the capital asset in that case was in the form of a business in bus service which was

bequeathed by the original owner to his widow and four sons under his will. At the time of the death of the testator, all the four sons were minors

and the widow took charge of the operation of the bus service and this position continued even after some of the sons had attained majority. The

Income Tax Officer treated the widow and the four sons as an association of persons. The Appellate Assistant Commissioner confirmed this

finding. In the appeal before the Tribunal, the Department raised the plea that even if the widow and the children could not be treated as an

association of persons, they could still be regarded as a body of individuals and charged to tax as a single unit of assessment. The Tribunal treated

the widow and the children as a body of individuals and directed the Income Tax Officer to amend the assessments accordingly. On a reference,

this court upheld the finding that the widow and the sons could be treated as a body of individuals. The circumstance which seemed to have

weighed with this court when the widow and her sons were treated as a body of individuals was that the integrity of the business continued with

none of the legatees wishing to take his or her share and depart and this, according to the court, was a clear indication that the mother and the

children were still keeping steps as a body of individuals. What is, however, important is that while discussing the concepts of ""body of individuals

and ""association of persons"", this court observed that these concepts excluded from their category those who found themselves thrown together by

the accident of their birth, by the accident of another''s death, by the accident of testamentary disposition and so on.

The facts of the present case clearly show that the four sons became owners of the property not as a result of their own volition, but by virtue of

what their respective mothers did in surrendering their life interest in the property which was ultimately sold and could not, therefore, be described

as a body of individuals, for, there is no other activity in which they joined for using the house as an income yielding asset. The Tribunal is,

therefore, right in holding that the four brothers could not be assessed as a body of individuals. The question is, therefore, answered in the

affirmative and against the Revenue. Since there is no appearance on behalf of the assessee, there will be no order as to costs in this reference.