Per Shri George Cheriyan, Accountant Member - IT Appeal Nos. 1338 and 1339 arise out of the income-tax proceedings for the assessment years 1978-79 and 1979-80 and WT Appeal No. 318 arises out of the wealth-tax proceedings for the assessment year 1979-80. A common contention is involved in all these appeals and, hence, these are taken up together and disposed of by a common order.
2. For assessment year 1978-79, originally, the assessment was completed in the status of an AOP on a return filed in the status of HUF. This assessment was set aside to be redone. The ITO issued a specific notice under section 148 of the Income-tax Act, 1961 (the Act) in the status of AOP. The assessee filed a return under protest. The income shown was Rs. 9,600. The assessee claimed that it was an HUF consisting of S/Shri Ramamohan Rao, Rajsekhar and Ramesh, minors. The ITO did not accept the contentions that there was a HUF. He held that the income of Rs. 9,600 was income of AOP but declared as not assessable as the income was below in taxable limit.
3. For the assessment year 1979-80, again a notice under section 148 was issued since the original assessment suffered the same fate as in the earlier year. Again the assessee filed the return under protest in compliance of the notice issued in the status of an AOP and the claim made was that the assessee was a HUF. Here also income of Rs. 7,730 was brought to the assessment rejecting the claim but the assessments in the status of an AOP was again declared as not assessable.
4. The assessee appealed and in a very elaborate order the AAC held that there could be no HUF. The AAC also referred to an argument of the assessee that the minors could not form an AOP but did not agree with the assessee. Eventually, the appeals were dismissed.
5. Before us the learned counsel submitted that the assessment in the status of an AOP was not warranted. To appreciate this contention, the facts which are not ex-facie discernible form the orders of the authorities below and which have be ascertained by us at the hearing have to be set out. One P. Chinna Chenchamma had by gift deed dated 15-11-1975 made a gift of gold jewellery weighing 71 tolas and 50 grams to Ramamohan Rao, Rajasekhar and Ramesh jointly describing the donee as the HUF of the aforesaid three persons. The value of the ornaments gifted came to Rs. 35,858.
6. On 20-11-1975, one B. C. Chenchamma also by a gift deed made a gift of 60 tolas of gold ornaments valuing Rs. 31,500 jointly to Ramamohan Rao, Rajasekhar and Ramesh, again describing the three persons as constituting a HUF.8. The gold received was sold and the amounts obtained were deposited in the concern of S. Sriramulu, the father of the minors, who constituted a HUF with the mother of the minors.
9. From the aforesaid deposits interest accrued and was credited to the joint account of the three persons. Such interest credits came to Rs. 9,600 in the accounting period relevant to the assessment year 1978-79 and Rs. 7,730 in the accounting year relevant to the assessment year 1979-80. The point that arises is in what status is the interest assessable.
10. The assessee contends that the status in which it is assessable is that of a HUF. No doubt, the donor in the deed of gift stated that the gift made to the three minors jointly was to the joint family comprised to them. Minors were joint in status with their father regarding certain assets. The minors were not in status a separate joint unit in respect of any other asset. A HUF cannot be formed by persons just coming together on their accord. We have, therefore, to hold on the facts as placed before us that three minors together did not constitute a HUF by themselves. Inasmuch as the gift was made jointly to the three minors by each of the donors, what has happened is that the gifted property became the joint property of the three minors. Section 45 of the Transfer of Property Act, 1882, lays down a rule of construction where immovable property is jointly transferred for consideration and there is absence of evidence as to the interest in the fund from which the consideration was paid, the persons purchasing the property are presumed to be equally interested in the property. The section as such was held not to apply to gifts but the rules contained in the section are based on principles of justice, equity and good conscience and the principle underlying the section would, therefore, apply to gifts also whether of movable or immovable property. This being the case where the gift in the present case is made jointly to the three minors, the presumption is that each one of the several transfers would be entitled to an equal interest in the property transferred. Thus, each one of the minors has to be considered, in our view, to have an equal interest in the property received by way of gift. The funds by sale of the property received by way of gift were invested as lump sum with the firm which belonged to the HUF, of which the father was the karta and the other member was the mother of the minors. The question that arises is whether the yield of such investment would be assessable in the hands of the three minors together in the status of an AOP. We have the judgment of the Supreme Court in the case of G. Murugesan & Bros. v.CIT  88 ITR 432 where their Lordships have observed as under : "For forming an association of persons, the members of the association must join together for the purpose of producing an income. An association of persons can be formed only when tops or more individuals voluntarily combine together for a certain purpose. Hence volition on the part of the members of the association is an essential ingredient.
It is true that even a minor can join an association of persons if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an association of persons from the mere fact that they jointly on one or more shares, and jointly received the dividends declared. Those circumstances do not by themselves go to show that they acted as an association of persons." The judgment in the case of G. Murugesan & Bros. (supra) is a clear authority for the view that even an assertion of the assessee would also be a good evidence as to the status of the assessee. In the present case, the assessee contended that the three minors together constituted a HUF. Because a HUF is not an entity which can be formed by three persons just asserting to that effect, we hold that they do not constitute a HUF. Therefore, even if the assessee held themselves out to be a HUF, it cannot lead to the inference that there is even an implied admission that they came together of their own accord or they voluntarily formed a unit. To constitute an AOP it is necessary that two or more individuals should voluntarily formed a unit. To constitute an AOP it is necessary that two or more individuals should voluntarily combine together for certain purposes. The judgment in the case of G.Murugesan is an authority for the proposition that a minor through guardian can also join an existing AOP. In the present case all the three persons whom received the gifts are minors. There is no evidence whatsoever to show that through guardian acting for each of them separately (in this case it is understood the guardian was the same person), it was decided that all the three minors should combine together voluntarily for receiving income. There is no evidence that any guardian acted on their behalf to voluntarily combine because their only contention was that they constituted a HUF and there was no question of the guardian acting for each of the minors separately since a HUF is not an entity that can be brought into being by a guardian acting on behalf of a minor. The assertion that the unit constituted a HUF is, therefore, not a sufficient evidence for an inference of a voluntary coming together being drawn. Therefore, in the present case there is no material to show that two or more of the minors acting through their guardian had voluntarily combined to deposit the money with the business of the HUF of which their father was the karta and the mother the other members of earning interest income. Thus, on the facts the income received is not that of an AOP. The income is one in which each of the minors had an equal right of ownership and each would be assessable separately. Thus, we have to hold that the assessments made in the status of an AOP for the assessment years 1978-79 and 1979-80 cannot stand and we allow the appeals of the assessee.
11. As far as the wealth-tax appeal is concerned, in the view that we have taken, the assessee does not constitute a HUF. An assessment to wealth-tax in the status of an AOP cannot also in the light of our findings be made. Even otherwise under the wealth-tax an AOP is not a taxable unit. In any view of the matter, therefore, the wealth-tax assessment would have to be cancelled.
12. The result is the wealth-tax appeal is also allowed and the order of the AAC confirming the assessment in the status of an AOP is set aside as also the assessment made by the WTO in that status.