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The Commissioner of Income-tax Vs. Dwarkanath Harischandra Pitale - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai
Decided On
Case NumberCivil Reference No. 5 of 1937
Judge
Reported inAIR1938Bom353; (1938)40BOMLR455
AppellantThe Commissioner of Income-tax
RespondentDwarkanath Harischandra Pitale
Excerpt:
indian income-tax act (xi of 1922), section 3, 9-association of individuals-residuary legatees under will-property held as joint owners-assessment of legatees as association of individuals.;where the assessees become entitled as residuary legatees under a will to property which they manage as a joint venture producing income, they become an association of individuals under section 3 of the indian income-tax act, 1922, and can be assessed as owners of the property under section 9 of the act.;commissioner of income-tax, bombay v. laxmidas (1937) 39 bom. l.r. 910 and in re b.n. ellias (1935) i.l.r. 63 cal. 538 followed. - .....kt., c.j. 1. this is a reference made by the commissioner of income-tax under section 66(2) of the indian income-tax act, and the questions raised are :(1) whether in the circumstances of the case, the assessees constituted in law an association of individuals within the meaning of section 3 of the indian income-tax act?(2) whether the said association can be said to be the owner of the properties within the meaning of section 9 of the indian income-tax act and was rightly assessed as such ?(3) whether the assessees were in any event rightly assessed as owners of the said properties under section 9(2) of the act ?the facts found are that the assessees became entitled as residuary legatees under the will of their grandfather to certain house properties in the city of bombay of the.....
Judgment:

John Beaumont, Kt., C.J.

1. This is a reference made by the Commissioner of Income-tax under Section 66(2) of the Indian Income-tax Act, and the questions raised are :

(1) Whether in the circumstances of the case, the assessees constituted in law an association of individuals within the meaning of Section 3 of the Indian Income-tax Act?

(2) Whether the said association can be said to be the owner of the properties within the meaning of Section 9 of the Indian Income-tax Act and was rightly assessed as such ?

(3) Whether the assessees were in any event rightly assessed as owners of the said properties under Section 9(2) of the Act ?

The facts found are that the assessees became entitled as residuary legatees under the will of their grandfather to certain house properties in the city of Bombay of the aggregate rental value of Rs. 25,000. They so became entitled in the year 1929, when the properties were handed over to them, and they have since managed the properties as joint owners, and derived profit therefrom. (I think this case is really governed by the decision of this Court in Commissioner of Income-tax, Bombay v. Laxmidas : (1937)39BOMLR910 in which we held, following the principle laid down by the Calcutta High Court in In re B.N. Ellias I.L.R. (1935) 63 Cal. 538 that two persons who had purchased property and managed it for the purpose of producing income were properly assessed as an association of individuals under Section 3 of the Indian Income-tax Act. The only distinction between that case and the present is that the original association in the present case was not a voluntary act on the part of the assessees. They did not purchase the property for the purpose of managing it; they received it under a will and:, it may be said, that in the first instance they did not constitute an association of individuals. But as soon as they elected to retain the property and manage it as a joint venture producing income, it seems to me that they became an association of individuals within the meaning of the Indian Income-tax Act, and that they are properly assessed as the owners of the property under Section 9. In my opinion, therefore, the questions must all be answered in the affirmative. The assessees to pay the costs of the Commissioner on the Original Side scale to be taxed by the Taxing Master, less the deposit of Rs. 100.

Blackwell, J.

2. I agree.


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