Per Shri Anand Prakash, Accountant Member - These nine appeals rise a common ground. They are, therefore, heard together and are being deposed of by a common order for the sake of convenience. Five of these appeals, viz., for the assessment years 1966-67 to 1970-71, have come up to us for the second time. They had earlier come up at the behest of the department and the position is same this time also. The Tribunal was called upon earlier to decide whether the assessee was assessable in the status of as AOP and whether the income was exempt in terms of Section 10 of the Income tax Act, 1961 [the Act]. The Tribunal sent back the case of the AAC to ascertain the fuller facts as to be ownership of the properties in question and then determine the question of assessability of the assessee. The learned AAC in his turn sent back the matter to the ITO with the direction that the ITO should complete the assessments afresh as per provisions of law. In accordance with the above direction, the ITO reframed the assessments on 16-3-1978, taking the status of the assessee as body of individuals. The plea of the assessee that the assessee was neither an AOP nor a BOI was negatived by the ITO. The assessee had taken further plea before him that, in any case, the assessees income was exempt from tax in terms of Section 10, as the assessee was from a scheduled tribe, deriving income from sources situated in the scheduled areas. The ITO negatived this stand by pointing out, inter alia, as follows :
"The individuals, it is admitted, belong to the Khasi Scheduled Tribe, and are entitled to exemption under Section 10 of the Income-tax Act. Provided other conditions are fulfilled. But this exemption under Section 10 of the Income Tax Act is granted to each of the members of the family in respect of their individual incomes. There is no reason as to way the collective income of the unit, i.e., clan or shop, which I have already determined to be a body of individuals, should enjoy exemption does not allow it."
2. The assessee appealed against the above finding of the ITO to the learned AAC, who disagreed with him on both the points. The learned AAC held :
"Basic intention of the legislature in bringing forward the status of AOP, and body of individuals is to bring into taxation net, certain association which cannot be assessed in the hands of the members separately (sic). However, the primary conditions for enabling the department to assess the association appears to be either through the liability of the individual members or due to voluntary getting together for a definite purpose. Since the Income-tax officer did not bring out the existence of such agreement as to treat the appellants as association of persons or as body of individuals there is no reasonable ground for assessing them as body of individuals ..."
As regards the assessees claim for exemption under Section 10(26), the learned AAC held, inter alia, as follows,
"... Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. Section 10(26) of the Income-tax Act, 1961 provides exemption to a member of the Scheduled Tribes as defined in article 366 of the Constitution. If the intention of the Act is to limit the exemption to individuals to the exclusion of the family and clan, etc. it would have made it abundantly clear as in the case of Hindu undivided family, etc. In the absence of such a clear-cut distinction, the Income-tax Officer is not justified in assigning restrictive meaning to the term member so as to deprive the appellant the exemption available him ..."
3. The department is now in appeal before us against the aforesaid two findings of the learned AAC on the basis of which he has annulled the assessment orders in respect of all the assessment years 1966-67 to 1975-76.
4. Before we consider the rival submissions of the two sides, it may be useful to note down briefly, the facts giving rise to the present appeals. According to the finding given by the ITO, the business of the departmental store is being carried on in the name of Mahari and Sons, and some properties and a petrol pump business belong to the members of the clan Kharshing. The common ancestress from whom the business has been inherited nominally by the Ka khaddu [i.e. the youngest daughter of the female line, Ka plesibon Kharshiing] was one latter of Income tax, which has been placed on the paper book by the assessee, the following individuals were members of the family of Ka Khaddu : 1 Sri G. M. Ray kharshiing, 2. Sri Jwain Singh Kharshing, 3. Ka femely, 4. Shri Hipshon Roy Kharshing, 5. Shri Dilkersen Kharshing, 6. Ka Malida Kharshing, 7. Ka Lesida kharshiing, 8. Dr. Worlok Kharshiing. 9. ka Limora kharshiing.
As per the finding of the ITO, the business and other properties are managed by the maternal uncle and brothers Ka Khaddu, in consultation with her father. According to him, the Ka khaddu is just a custodian of the family or clan orkhop property, and she is not the owner properties, All the profits of the business and income from properties, etc. are to be enjoyed by all the members of the clan, though these members have no right to claim their respective shares in the clan property or business as according to the Khasi law they do not have any right to claim the partition nor their shares in the ancestral property are determinate. According to the ITO, the business of Mahari & Sons is run by the members of the family of clan Kharshiing as a unit.
5. The above findings of fact given by the ITO are accepted by the opposite side as correct.
6. On the basis of the aforesaid facts, the ITO has given the finding, as noted above, that the sources of income enumerated above belonged to a BOI, consisting of the members of the family, as in his opinion, it was not at all important that the various individuals, who constituted the BOI joined the said body of individuals voluntarily or otherwise. So long as they earned the income jointly, however they might have come together, they would from a BOI. The learned departmental representative support, the above finding of the ITO and cities the following authorities in support of his contention - Deccan Wine and General Stores v. CIT : 106ITR111(AP) and CIT v. Harivadan Tribhovandas : 106ITR494(Guj) .
A reference is also made to the commentary of Sundarams Law of Income-tax in India wherein the learned author makes the following observation on the basis of the aforesaid two decisions :
"The distinction between the association of persons and body of individuals could only be with respect to the origin, viz., that even an involuntary association may be a body of individuals ... The expression body of individuals should receive a wide interpretation. However, while on the one hand it will not apply to an association of persons. i.e., where the persons concerned combine to engage in an income producing activity by common design, on the other hand it will not extend to a body of individuals who merely receive income jointly without anything further, like coheres inheriting shares or securities; it will include a combination of individuals who have a common interest but who are not actuated by a common design and who are engaged in income-producing activity. It connotes conglomeration of individuals who carry on some activity with the object of earning income ...." (p. 337)
On the basis of the aforesaid authorities the learned departmental representative submits that the present assessee is a body of individuals, because we have here a conglomeration of individuals, who carry on business of running petrol pump and a departmental store, with the object of earning income. The learned AAC was, in view of the above submissions, it is urged, correct in holding that the assessee was not a body of individuals.
7. The learned departmental representative also assails the finding of the learned AAC that the word person used in Section 10 would include a BOI in its compass, and that profit made by a body of individuals consisting of members of the scheduled tribe would be exempt under the said sub-Section. He reiterates the stand of the ITO in this connection, and submits that the only proper way to interpret Section 10 would be to equate the word person used in the said sub-Section to a physical person, viz., an individual, and income of only such individual, according to him, was exempt under Section 10. If such individuals form a unto do a business jointly, such unit would not be entitled to exemption under Section 10.
8. On behalf of the assessee, the aforesaid submissions of the learned departmental representative are stoutly opposed and reliance is placed on the decision of the learned AAC in this regard. He also drawn our attention to the decision of the Appellate Tribunal, Gauhati Bench. Gauhati, in WT Appeal NOs. 47 to 55 (Gauhati) of 1972-73, dated 17-3-1975, wherein our learned brothers have held, following the Full Bench decision of the Kerala High Court in the case of Mommad Keyi v. WT O : 60ITR737(Ker) , that a non-Hindu family like that of Mophals of North Malabar, who follow the Marvmakkattayam system, are not an assemble entity under the Wealth-tax Act, and on that analogy, it is urged that a Khasi family, governed by Khasi tribal law, is also not assessable under the Wealth-tax Act. It is the submission of the learned counsel for the assessee, on the basis of the above decision, that the said family is not assessable for the income-tax purpose also, as it cannot be fitted in any of the descriptions of a person given in section 2(31) of the Act.
9. As regards the claim of exemption under section 10, the learned counsel for the assessee submits that if the individuals individually are entitled to exemption, they are also so entitled if they derive income form assets jointly held by them.
10. We have carefully examined the facts of the case and the rival submission. So far as the first contention of the revenue is concerned, we are of the opinion that it should succeed. The various members of the Khasi family who jointly own jointly own and ran the business in question after the death of the common ancestress through Ka Khaddu do constitute body of individuals. It is not denied that none of them owns the businesses and properties in question in their individual rights but they are owned jointly and run and managed jointly. The income earned from the said business and properties belongs to none in their individual capacities and has to be utilised for the maintenance and upkeep or all the members of the family. The members of the family run the businesses in question jointly, and the income earned from the business is the effort of their joint endeavor. Once it has been shown that a certain property is being exploited by a BOI, however they might have acquired it, by common endeavor and effort, the said conglomeration of individuals has to be held to be body of individuals in accordance with the ratio of the above two decisions cited in para 6 above. The learned AAC had apparently not noticed these two decisions. The learned AAC had apparently not noticed these two decisions. Any other interpretation of the term BOI would not be in consonance with the scheme of the Act. We, therefore, reverse the order of the learned AAC on this account and hold that the proper status of the assessee in the present case is that of body of individuals. Reliance placed by the assessee on the decision of the Appellate Tribunal in WT appeal Nos. 47 to 55 [Gauhati] of 1972-73 dated 17-3-1975 is of no avail, because the decision of the Full Bench of the High Court on which our learned brothers had relied, for giving the said judgment has since been reversed by the Honble Supreme Court by their judgment in the case of WTO v. C. K. Mammed Keyi : 129ITR307(SC) .
10A. On the second count, however, we are not inclined to accept the contention of the learned departmental representative. The ordinary state of Khasi society is that of jointness, wherein the individual is not the unit of society; the families constitute the clan and the various clans constitute the society. The ancestral properties, as in the present case, are inherited and held not by an individual for her own exclusive use but by Ka Khaddu for the benefit of the entire family, which in the case of Khasis is matriarchal in form. Even the self-occupied property of a Khashi, if acquired before marriage, and if he dies before getting married, goes to his mother or Kur. The earnings of the male are regarded as part of the family earnings and are placed by him at the disposal of the mother. Even if he keeps some income for himself, on his death, his mother or her nearest female kur, takes it. After marriage, the Khashi husband goes to live in the house of the mother of his wife or in the house of his wife. Before the wife has child, the husband uses sufficient part of his own earnings for the maintenance of his wife, the surplus or a portion of this surplus, he may give to his kurs. After the birth of the child, husband and wife work and earn jointly for the child. The husband works with his wife on the land, or is engaged in the trade with the capital supplied by her. The earnings of the male in such a situation cannot be distinguished from those of his wife. The individual property its that not the norm in the Khasi society. It is, of course, not to suggest that a Khasi male cannot have his own property, earned by his own sweat. There are men of considerable property, who will dispose of that property among their relatives as they deem fit. By pointing out the above peculiarities of the Khasis, the individual is not the unit of society. It is the family which is the unit, and, if this peculiarity is kept in mind, it would be immediately obvious that the ancestral properties would always be held by Ka khaddu for the family and most the self acquired properties also would become the properties of family either on the mothers side or of threat consisting of wife and the children. The use of the word person in Section 10 in the context of the above peculiarities of the Tribal law, assumes importance. The legislature has deliberately not used the word individual in Section 10 and has, instead, used the word person, which is wide enough to included in its ambit, that the Parliament intended to grant exemption only marginally, and intended to leave out the bulk of the Khasi society, Wherein properties, and business are owned by family units, and in which the individual members do not have any determinate interest and unlike Hindus, cannot even ask for division of properties. If we interpret Section 10 as suggested by the revenue, we would be rendering the exemption illusory. Apart from it, it would not be in accordance with the deliberate language used by the Parliament.
11. We are, therefore, of the opinion that the income earned by a khasi family as unit would be entitled to exemption under Section 10 in the same manner as self earned income of an individual Khashi by the profession of employment would be [sic].
12. In view of what we have stated above, we hereby reject the departmental appeals.