COMMISSIONER OF INCOME TAX Vs. DEGHAMWALA ESTATES

JUDGEMENT

(1.) THE following common question has been referred under Section 256(1) of the I.T. Act for the assessment years 1965-66 to 1968-69 :

(2.) FOR the assessment year 1965-66 the accounting year ended on November 4, 1964. T. M. Sidhpurwala and T. M. Badruddin Mohammed Ali sold on February 28, 1964, the property bearing No. 12/13, Angappa Naicken Street, Madras, for a consideration of Rs. 12,000. On 12th October, 1964, the two brothers along with three others sold certain house sites in survey No. 4 at Sidhpur in Mehsana District of Gujarat for Rs. 24,628'04. The ITO brought to tax a sum of Rs. 42,084 as long-term capital gains, after giving a deduction of Rs. 5,000 being the statutory exemption in respect of the above transactions. The assessment was made in the status of " association of persons ". There was an appeal to the AAC, who held that the capital gains' could not be assessed in the hands of an " association of persons ", but had to be assessed only in the hands of the two individuals, Sidhpurwala and Badruddin Mohammed All. The department filed an appeal before the Tribunal, and by its order dated 16th July, 1969, it held that the sales were not effected by the association of persons and that, therefore, there was no capital gains assessable in the hands of the " association." Against that decision there was a reference to this court in T.C. No. 320 of 1970, The decision of this court on the reference is CIT v. Deghamwala Estates, 1977 109 ITR 416. It was held that the two persons were only tenants-in-common in respect of the shares inherited from their father, and that they did not constitute an " association of persons ". With reference to one of the properties, which was in Gujarat State, the father himself had only one-half share and the two heirs succeeded only to that share, and the strangers, who owned the other half share, also joined together in the execution of the sale deed. It was held that the said two persons could not be taken to have constituted an association of persons in respect of that property also. The reference was answered on April 5, 1976.

(3.) THE word " person " has been denned in Section 2(31) as follows :