COMMISSIONER OF INCOME TAX Vs. MURUGESAN G

JUDGEMENT

(1.) THIS question turns on the status of the assessee. The reference which comes before us at the instance of the Commissioner of Income-tax under Section 66(1) of the Income-tax Act, 1922, relates to the assessment years 1957-58 to 1962-63. The question under reference is:

(2.) ON December 4, 1940, Sinnamani Nadar and his son, Ganesan, effected a partition of the family properties and a firm by name A.M.M. Sinnamani Nadar Firm was started on June 27, 1955. Sinnamani Nadar executed a settlement deed conveying to his four grandsons the life-interest in a house property, 94, V.E. Road, Tuticorin, and the remainder to their children. Sinnamani Nadar also made a gift of a certain number of shares in joint stock companies in the name of G. Murugesan and Brothers. The four grandsons, Murugesan, Kathiresan, Raja Shanker and Vetrivel, attained their age of majority on March 15, 1955, February 3, 1956, September 2, 1961, and December 12, 1962.

(3.) BUT the difficulty arises more often than not in the application of these tests. Before us, as is to be expected, our attention has been invited at the Bar to a number of cases. Commissioner of Income-tax v. Indira Balkrishna, referred to In re B. N. Elias, [1935] 3 I.T.R. 408. Commissioner of Income-tax v. Laxmidas Devidas, [1937] 5 I.T.R, 584 and In re Dwarakanath Harischandra Pitale, [1937] 5 I.T.R. 716. 721, and observed that these decisions correctly laid down the crucial test for determining what an association of persons within the meaning of Section 3 was. On facts it was a case of three widows owning property in common and deriving income therefrom. There was a finding that they had not exercised their right to separte enjoyment and, except for receiving dividends and interest jointly, they had done no act which had helped to produce income in respect of the shares and deposits. On these facts, the Supreme Court held that the three widows had not the status of an association of persons within the meaning of Section 3 of the Income-tax Act. Dwarakannatk Harischandra Pitata, In re related to persons inheriting immovable property in equal shares under a will and the legatees jointly managing the properties. Beaumont C.J. and Blackwell J. were of the view that they constituted an association of persons. The learned Chief Justice, with whom Blackwell J. agreed, observed :