MEERA AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS order will dispose of Income-tax References Nos. 22 to 26 of 1972, all relating to the same assessee (M/s. Meera & Co.), referred to us by the Income-tax Appellate Tribunal on the following questions :

(2.) THE facts of the case, which are not disputed, are that Shri Prem Narain, an individual, carried on business under the name, M/s. Meera & Co., at Ludhiana. Assessments to income-tax were made on him in his trade name, M/s. Meera & Co. He died intestate on August 25, 1962, survived by his mother, widow and three minor children. All the assets of the deceased, including the business styled as Meera & Co., devolved on his five legal heirs. THE mother of the deceased relinquished her interest in the assets of the deceased against a lump sum payment. For the purpose of these references, we are concerned with the widow and three minor children of the deceased. THE business of M/s. Meera & Co. was continued as a single unit in the same name by Shrimati Krishna Gupta, widow of the deceased, obviously on her behalf and on behalf of all the three minor children as their guardian. THE accounts were maintained in the name of M/s. Meera & Co. THE yearly profits were ascertained and divided. THE income-tax returns for the assessment years 1963-64 to 1967-68 were filed by Shrimathi Krishna Gupta on behalf of M/s. Meera & Co. THE status of the assessee was described as "association of persons". THEse returns reflected the entire income from business previously carried on by Shri Prem Narain, deceased. On January 25, 1968, Shrimati Krishna Gupta filed the return under protest and further revised the returns for the assessment years 1963-64 to 1966-67, declaring the same income that had been shown in the returns already filed but without specifying the status therein. It was contended that the income from the business should be assessed in equal shares in the hands of the four legal heirs of the deceased. THE minor children of the deceased also filed separate returns where the share of profit from M/s. Meera & Co. was included for rate purposes only. THE ITO did not agree with the altered position taken by the assessee that the income from the business was liable to be assessed in equal shares in the hands of the four heirs of the deceased. He held that the business was for one and common unit and the same was assessable in the status of "body of individuals". THE assessee, being dissatisfied with the order of the ITO, filed an appeal and the AAC held that the entire income of the business was assessable in the hands of Shrimati Krishna Gupta as a person carrying on business in an individual capacity. THE revenue and the assessee both filed appeals before the Tribunal. THE Accountant Member of the Tribunal found that the business was carried on as an organic unit by Shrimati Krishna Gupta on her own behalf and on behalf of her three minor children as their natural guardian. On the death of Shri Prem Narain, his estate fell to his legal heirs under Section 8 of the Hindu Succession Act as tenants-in-common. THE special provisions regarding the minors and guardians contained in Sections 160, 161 or 166 of the I.T. Act (hereinafter referred to as " the Act "), shall apply which otherwise override the general provisions contained in Sections 4 and 2(31)(v) of the Act. THE Judicial Member took a different view. According to him, the entity was liable to be assessed under Section 4 read with Section 2(31)(v) of the Act. He repelled the contention of the assessee for an assessment under the special provisions meant for representative assessees, that is, Sections 160, 161, etc. He opined that before the assessee could be so treated, he must filter through the charging Section 4, read with Section 2(31)(v) of the Act and if he cannot do so, he must stay there. In the event of the assessee being a body of individuals, as defined in Section 2(31)(v), the question of the applicability of Sections 160, 161, etc., of the Act did not arise. As the two members of the Tribunal differed, the matter was referred to a third Member who agreed with the view taken by the Judicial Member and the appeals of the assessee were consequently dismissed. THE assessee having approached the Tribunal for making a reference to the High Court on questions of law, the two questions detailed above have been referred. It is under these circumstances that this matter has come up before us.

(3.) IT is the common case of the parties that the assessee in the instant case is not an association of persons. The assessee would, therefore, be a body of individuals or an individual as defined in Sub-clause (v) or Sub-clause (i), respectively. The fate of the case will follow the finding on this point. Should the assessee be liable to be assessed as an individual, the provisions contained in Sections 160, 161, etc., of the Act shall stand attracted and in that case the income from the business may be liable to be assessed in equal shares in the hands of the heirs of Shri Prem Narain, deceased. In the event of the assessee being treated as a body of individuals, it shall have to be treated as an entity for the purpose of charging Section 4 of the Act and in that case, the question of the applicability of the provisions contained in Sections 160, 161, etc., should not arise.