COMMISSIONER OF INCOME-TAX Vs. MRSJVSALDHANA

JUDGEMENT

(1.) The facts out of which this reference by the Commissioner of Income-tax arises may be shortly stated. Mr. J. V. Saldhana, a resident of Mangalore died in April 1922 leaving behind him a widow and seven children, one of whom died subsequently. At the time of his death he owned coffee plantations in the Mysore State and house properties in Mangalore and was a partner to the extent of a one-third share in a firm of coffee curers styled A. J. Saldhana and Son, Mangalore. Under the Indian Succession Act his property descended to his widow and to his children, the widow getting one-third share and the children getting equally the remaining two-thirds. They do not constitute a joint family but are tenants-in-common of the estate which has not been divided by metes and bounds. Mrs. Saldhana was originally assessed by the income-tax officer on the basis that the whole of the income accrued to her. She then objected to the assessment and contended that she was the owner of only one-third of the estate and her children were separate owners of shares in the remaining two-thirds and that they may be liable to income-tax on their shares separately but that she was liable to pay income-tax only on her one-third share. This contention was upheld and she was accordingly assessed on her one-third share, the children being assessed separately. This was in October 1928. Later on a notice was issued by the income-tax officer in September 1930 calling upon her to submit returns of her income from the business for the two years 1929-30 and 1930-31 as he proposed to revise the assessment. The reason for this notice was a decision of the Lahore High Court reported in Hotz Trust of Simla V/s. Commissioner of InCome-tax A.I.R. 1930 Lah. 929. Though she did not submit returns of her income the income-tax officer following the decision in Hotz Trust of Simla V/s. Commissioner of Income-tax A.I.R. 1930 Lah. 929, and holding that she is assessable for the total business conducted by her on behalf of herself and her children on the ground that it is all one business, made a further estimate of the income and assessed her accordingly. On appeal the Assistant Income-tax Commissioner agreed with the revised assessment and dismissed her appeal.

(2.) In para. 4 the Assistant Commissioner observed in reply to the argument of the appellant; that she and her children could not be assessed as an association of individuals, that it was not the appellant's children that have been assessed in this case but the appellant individually. There was a review petition to the Commissioner of Income-tax with a prayer that the Commissioner should either cancel the re-assessment or refer the location of law for the decision to the High Court. Accordingly the Commissioner of Income-tax referred the following question to the High Court: Where on the facts of this case, a single assessment should be made on Mrs. Saldhana on (1)the entire income derived from the business carried on by her, and (2) the whole of the one-third share of the profits derived by her from the business conducted by her under the style A. J. saldhana and Sons in partnership with other, or whether separate assessments should be made on her and the other heirs on their respective shares of such income.

(3.) In his letter of reference he expresses the opinion that Mrs. Saldhana and her children constitute at least an association of individuals.