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Shri Rajesh B. Rathi Trust Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Pune
Decided On
Judge
Reported in(1984)8ITD273(Pune.)
AppellantShri Rajesh B. Rathi Trust
Respondentincome-tax Officer
Excerpt:
1. since the contentions raised in these three appeals filed by the assessees are similar, they will conveniently be disposed of by this common order. the question which arises for determination in these appeals is whether the assessees are entitled to the deduction claimed under section 80l of the income-tax act, 1961 ('the act') in computing the total income. the facts which are relevant for deciding this question lie within a narrow compass. the assessment in each of the three cases has been framed on the trustees, of the trusts. in it appeal no. 497 (pn) of 1983 the trust was created under the will of late shri j.m. rathi who expired on 23-8-1976. in it appeal no. 500 (pn) of 1983 the settlement on trust was made by the settlor by written instrument, whereas in it appeal no. 637 (pn).....
Judgment:
1. Since the contentions raised in these three appeals filed by the assessees are similar, they will conveniently be disposed of by this common order. The question which arises for determination in these appeals is whether the assessees are entitled to the deduction claimed under Section 80L of the Income-tax Act, 1961 ('the Act') in computing the total income. The facts which are relevant for deciding this question lie within a narrow compass. The assessment in each of the three cases has been framed on the trustees, of the trusts. In IT Appeal No. 497 (PN) of 1983 the trust was created under the will of late Shri J.M. Rathi who expired on 23-8-1976. In IT Appeal No. 500 (PN) of 1983 the settlement on trust was made by the settlor by written instrument, whereas in IT Appeal No. 637 (PN) of 1983 the trust was an oral trust. The beneficiaries under each trust are the family members of Shri J.M. Rathi. It is common ground that all the trusts are private discretionary trusts and the income is not specifically receivable on behalf or for the benefit of any one beneficiary, nor are the individual shares of the beneficiaries under the trusts determinate or known. The income is derived by way of dividends on shares settled on trust. The claim for deduction is made in terms of Clause (iv) of Section 80L(1). We have considered the facts of the cases and have heard the learned counsel for the assessees and the learned departmental representative.

2. The ground on which Shri V.G. Bhide, the learned counsel appearing on behalf of the assessee, presses the claim for deduction is that the assessees having been assessed in the status assigned to them as AOP in the assessments which have been upheld in appeal by the AAC or entitled to the deduction in terms of Clause (c) of Section 80L(1). It would be convenient to reproduce the relevant provisions of the section here to facilitate consideration of the claim. Those provisions read as under: (c) an association of persons or a body of individuals consisting only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, The authorities below have negatived the assessees' claim on the ground that the qualifying clause 'consisting only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu,' apply to an AOP or a BOI referred to in the provision and admittedly, the assessees do not come within this category. Shri Bhide's case, on the other hand, is that the qualifying clause applies only to a BOI referred to in the provision and not to an AOP. In other words, Shri Bhide wants to read the provisions of Clause (c) disjunctively as between an AOP and a BOI. In our view, this contention of Shri Bhide's is not tenable. This question had been raised in terms before this Tribunal in the case of ITO v. Cosmos Co-operative Urban Bank Ltd., Pune, and was decided against the assessee by its order in [IT Appeal No. 454 (PN) of 1975-76 dated 14-10-1976] holding that the qualifying clause applies to both an AOP as well as to a BOI. In arriving at this conclusion, the Tribunal went into the enactment and development of the provisions of Section 80L to show how the qualifying clause applied to both the types of taxable entities. This is what the Tribunal held: When Section 80L was initially introduced, it gave deduction in respect of interest of certain securities, dividends, etc., earned by all categories of assessees. However, the Finance (No. 2) Act, 1971, with effect from 1st of April, 1972, made a change in that section. The Finance Bill, 1971, substituted only two types of assessees, viz., (a) an individual; and (b) a HUF, in place of all the categories of assessees as was provided prior to the amendment.

But by the time the Finance Bill, 1971, was passed into Finance (No. 2) Act, 1971, two more categories of assessees, viz. (i) an AOP; and (ii) a BOI, were added. These two categories of assessees were added to the original list on the representation which was made by the assessees in the Union territories of Goa, Daman and Diu. The reason was that under the Portuguese Civil Code, by which their rights to property were governed, the husband and wife married under the law of realm, being the Portuguese Civil Code, constituted a communion of persons for the purpose of assessment with respect to the income earned from their communion property. There was dispute between the revenue and the assessee from Goa as regards the liability of income from the communion property. The dispute was whether the husband and the wife should be assessed equally on such income, in their individual status or should they be assessed in one assessment, as an AOP or a BOI, on the ground that the two had joined for the purpose of earning income from the communion property. By the time the Finance (No. 2) Act, 1971, was passed, this dispute was not resolved by an authority to pronouncement of the High Court or of the Supreme Court. Hence, in respect of the income of the communion property, assessments were being made either in the status of (i) an AOP; or (ii) a BOI. In these circumstances, the framers of the legislation as a matter of abundant precaution thought it appropriate to give deduction under Section 80L to both the types of communions of the husband and the wife. viz. (i) an AOP; and (ii) a BOI, constituted by them under the law of the Portuguese Civil Code as operative in the Union territories of Goa, Daman and Diu. In view of this history and development of Section 80L, we have no doubt in our mind that 'this association of persons' (sic).

3. Now in support of his contention, Shri Bhide seeks to place reliance on two rulings, one of the Bombay High Court in the case of CWT v.Vesudeva V. Dempo [1981] 131 ITR 291 and the other of the Supreme Court in the case of Dharmadeepti v. CIT [1978] 114 ITR 454. The case before the Bombay High Court arose under the Wealth-tax Act, 1957 ('the 1957 Act') and was decided by its judgment dated the 1-3-1979. In that case the Bombay High Court considered the submission made on behalf of the assessee that the husband and wife governed by the system of community of property under the Portuguese Civil Code operative in Goa constituted an AOP so as to be liable under the 1957 Act. The High Court was pleased to reject this contention holding that the husband and wife did not constitute an AOP. Shri Bhide seeks to rely on this decision to advance his contention that the qualifying clause in Clause (c) cannot, therefore, be held to apply to an AOP. In our view, this contention is not sustainable. As brought out by the Tribunal in the case of Cosmos Co-operative Urban Bank Ltd., Pune, (supra), referred to above, no pronouncement from judicial authority whether of the High Court or of the Supreme Court was available when provisions of Clause (c) were enacted and it cannot, therefore, be held that the Legislature intended to exclude an AOP from the qualifying clause and to extend the relief provided in terms of Clause (c) of all AOP. Reliance on the Supreme Court ruling is placed by Shri Bhide to contend that Clause (c) should be read disjunctively and the qualifying clause should be applied only to a BOI. The Supreme Court in the cited case was concerned with the interpretation of Section 2(15) of the Act and was pleased to hold that the adjectival clause in the definition of charitable purpose did not apply to the other objects stated therein but governed the words 'the advancement of any other object of general public utility'. We fail to see how this ruling is of any assistance at all to the assessee since the language of the two provisions, i.e., Section 2(15) and of Clause (c) of Section 80L(1) are entirely different, appearing in different contexts of the two statutory enactments. We, therefore, reject this ground raised by Shri Bhide.

4. The learned counsel for the assessee next seeks to canvass the claim on two additional grounds for the admission of which he has sought leave of the Tribunal. These grounds are as under: (1) The words 'consisting of only husband and wife governed by the system of community of property in force in the Union Territories of Dadra and Nagar Haveli and Goa, Daman and Diu govern only the Body of Individuals appearing in Section 80L(1)(c) and they do not govern the words 'Association of Persons' appearing in Section 80L(1)(c) and, therefore, Section 80L deduction be granted to the appellant--even if the assessee is assessed as Association of Persons.

(2) The status of the assessee should be taken the same as that of the beneficiary, since the assessment is to be made on the trustee in the same manner and to the same extent---as it would be on the beneficiary. It is, therefore, prayed that the status of the assessee be taken, accordingly.

The first of those grounds cannot be considered to be an additional ground, since in the memo of appeal the assessees had already raised the ground contending against the disallowance of the deduction claimed which had specifically been made on the footing that the assessee being an AOP was excluded as such from the benefit of Clause (c). Therefore, the first additional ground really is nothing more than an argument in support of the ground raised in the memo of appeal itself. We have already dealt with Shri Bhide's contentions raised on this ground in the foregoing paragraphs and have rejected them. Nothing further survives, so far as this so-called additional ground is concerned.

5. Shri K.A. Sathe, on behalf of the department, objects to the admission of the other additional ground contending that the ground is being raised for the first time before the Tribunal and in support of his contention he relies upon the ruling of the Bombay High Court in the case of Ugar Sugar Works Ltd. v. CIT [1983] 141 ITR 326. Now that case arose before the Bombay High Court on the following facts. The assessee, a public limited company, carrying on business of manufacture and sale of sugar, claimed in its return filed before the ITO development rebate on electric motors as also on various other items of machinery, motor car and jeeps, etc. The ITO in the assessment rejected the claim in respect of both the sets of items. The assessee in appeal before the AAC did not challenge the ITO's finding about rejection of its claim for development rebate on electric motors either by making it a ground in the memo of appeal and/or by raising contentions against it even in the course of the arguments before the AAC. The assessee had challenged before the AAC only rejection of its claim by the ITO on the other items. Further appeal was taken by the assessee from the order of the AAC before the Tribunal. In the memo of appeal no ground was raised against the disallowance of the claim in respect of the development rebate but subsequently an additional ground was sought to be raised claiming the development rebate on the electric motors also. The Tribunal refused to admit the additional ground. It was on these facts and circumstances that the High Court came to consider whether the Tribunal was correct in law in refusing leave to the assessee to raise the additional ground. Analysing the relevant provisions of the Act in this behalf, the High Court was pleased to make a distinction between the jurisdiction and powers of the Tribunal in dealing with an appeal as compared with the jurisdiction and powers of the AAC or the first appellate authority. The High Court held that while the jurisdiction of the first appellate authority extended over the subject-matter of assessment, so that the authority could consider and pronounce upon all the matters which were raised in the assessment, whether or not they were considered and decided by the ITO, the jurisdiction of the Tribunal was limited. The Tribunal's jurisdiction extended only to the subject-matter of appeal filed before it, although within that jurisdiction, the Tribunal was vested with almost the same powers as those of the AAC in deciding the appeal.

6. It was by applying these principles to the case before it that the High Court laid down that inasmuch as the assessee had not objected to the express disallowance of its claim for development rebate on electric motors by the ITO in the appeal which it filed before the AAC, it followed that the assessee had accepted the ITO's decision and could not be held to have been aggrieved by that decision since it was not challenged before the AAC. Such being the case, this point neither arose nor was considered by the AAC and, therefore, could not constitute the subject-matter of appeal taken before the Tribunal. In this context, it is important to note, in our view, that the High Court, if we may say so with respect, was at pains to observe that while dealing with the question as to the jurisdiction of the Tribunal which is restricted to the subject-matter of an appeal, one can visualise the existence of various situations other than a plain and straight forward situation as arising in the case before it. The High Court was pleased to illustrate what such situations would be in the following passage of the report: ... Some of such cases as one can visualise would be, where the validity of the order is challenged on the ground of total lack of jurisdiction in the ITO, that is, the order being non est, as going to the root of the jurisdiction of the ITO, or where the order of the ITO was challenged on the grounds of appeal before the AAC but was not either passed, or, though taken in the grounds and argued, the order of the AAC might have remained silent about it indicating an implied rejection, or where the finding of the ITO, though challenged before the AAC on one ground, was sought to be challenged before the Tribunal on a different ground. We, therefore, make it clear that we propose to determine the question of the Tribunal's jurisdiction with reference only to the facts and circumstances of the case, namely, where the finding of the ITO, without being challenged either expressly or impliedly before the AAC, was sought to be challenged before the Tribunal, and we do not wish to consider the said question as arising under other situations visualised above.

7. Applying the principles laid down by the Bombay High Court in the aforesaid case to the cases before us, can it be said that the question of determination of the correct status of the assessees was not the subject-matter of assessment or that question was not the subject-matter of appeal decided by the AAC? Determination of the status was basic to the assessments framed by the ITO and that status was determined by him as AOP. The assessees in appeal before the AAC contended that they were entitled to the relief under Section 80L even in that status. The AAC rejected this contention holding that since the status of the assessees was that of AOP, it was debarred from allowance of the relief in terms of Clause (c) of Section 80L since that clause applied only to the special type of AOP or BOI governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu. On these facts, we do not see that the question of the correct status of the assessee apart from the determination of such status being basic to the assessment, lay entirely beyond the scope of consideration by the AAC. On the other hand, we are clearly of the view that in holding that the assessee was an AOP, but not of the special kind as contemplated in terms of Clause (c) of Section 80L, the AAC must be held to have considered and pronounced upon the question of the status of the assessee at least by implication. The case, therefore, to our minds, falls within the ratio of the ruling of the Gujarat High Court in the case of CIT v.Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254 which was followed by the Bombay High Court in the case of Ugar Sugar Works Ltd.'s case (supra), already referred to. The Gujarat High Court in the said case has laid down as to what is to be understood to be the subject-matter of an appeal before the Tribunal in these terms: Accordingly, it must be found out what is the subject-matter of appeal and that can be determined only by finding out what the Appellate Assistant Commissioner expressly or impliedly decided.

What is meant by implied decision is that though a point might have been raised before the Appellate Assistant Commissioner in his final order the Appellate Assistant Commissioner might not have dealt with that point and thereby impliedly rejected it. A party may be aggrieved by an express decision of the Appellate Assistant Commissioner or by an implied decision of the Appellate Assistant Commissioner. The subject-matter of the appeal before the Tribunal can only be the decision, express or implied, of the Appellate Assistant Commissioner and the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal...

The question of determination of the correct status of the assessee, therefore, cannot be held on the facts and in the circumstances of the cases before us as being outside the pale of the subject-matter of appeals. We further find that Shri Bhide is correct in his contention that the question of status is a question of law and is to be decided, not by adducing any fresh evidence or facts but on the facts and evidence on the record. We, therefore, hold that Shri Bhide's contention deserves to be accepted, following the ruling of the Bombay High Court in the case of J.S. Parkar v. V.B. Palekars [1974] 94 ITR 616 and the ruling of the Supreme Court in the case of CIT v. S.Nelliappan [1967] 66 ITR 722. We, therefore, admit the additional ground raised by the assessee.

8. The question, therefore, of determining the correct status of the assessee clearly arises and falls for determination in these appeals.

Before, however, we take up this question, it is necessary to consider and dispose of an important contention raised by Shri Sathe on behalf of the department and it is this. On the admitted ground that the income receivable by the trustees, which was the subject-matter of assessment, was not specifically receivable on behalf of any one beneficiary nor were the shares of the beneficiaries in that income determinate or known, the assessment had necessarily to be made in the cases of the testamentary and non-testamentary trusts constituted by written instruments under the substantive part of Section 164(1) of the Act and in the case of private oral trusts under Section 164A of the Act, the assessment year in the latter case being the assessment year 1981-82 (Section 164A came into effect for assessment in the case of private oral trusts with effect from 1-4-1981, i.e., for the assessment year 1981-82). His proposition is that if we look at the language of Section 164A, on the strength of which he develops his argument in the first instance, it would be seen that the charge of tax on the income which the trustee receives or is entitled to receive under an oral trust is laid upon that income and the rate of that tax is also prescribed at the maximum marginal rate which is defined in Explanation 2 to Section 164. This provision employs a non obstante clause and, therefore, must be applied notwithstanding anything contained in any other provision of the Act. On these premises, Shri Sathe contends that when a case falls under Section 164A, the income in question is subjected to the charge of tax not under the charging provisions Sections 4 and 5 of the Act, but under the provisions of Section 164A itself. In other words, he argues that the charge with reference to the income referred to under Section 164A is not on total income as levied under Section 4, but on income per se. To the same effect, according to him, are provisions of Section 164(1) since the provisions of Sub-section (1) of that section similarly charge income and not total income prescribing rate of tax as the maximum marginal rate as defined in the aforesaid Explanation 2.

9. Shri Sathe then proceeds to enlarge upon his proposition to argue that by virtue of the income in the present cases having to be assessed under Section 164A or 164(1), as the case may be, provisions of Section 80L in terms would not be applicable to these cases and would be expressly excluded. Section 80L, he contends, is one of the sections providing for deductions referred to in Section 80A of the Act and both Section 80A as well as Section 80L prescribe that the deductions referred to are to be allowed in computing the total income of an assessee, such deductions to be made from his gross total income. It follows, therefore, according to him, that the deductions claimed under Section 80L would not be available, except in the computation of total income of the assessee. Now it is the computation of total income itself which is excluded in a case to which provisions of Section 164A or Section 164(1) are applicable. For the aforesaid reasons, to put it in a nutshell, Shri Sathe's contention is that since it is the income and not the total income which is made subject of charge under the special provisions of Section 164A or Section 164(1), no question at all arises of allowing any deduction under Section 80L which would be available only if the total income was required to be computed.

10. Shri Sathe's contention, in our view, ingenious though it certainly is, lacks substance. The reason, to our minds, is to be found in the very scheme of the Act by which income is made chargeable to tax only after it has been subjected to assessment or computation. The mode and manner of assessment or computation of every species of income made liable to tax has been laid down in the Act. It is only after the income has been so computed under its particular head and is entered as a constituent of the total income comprising of the various heads of income that charge of tax can be levied on the total income into which such income has been so integrated. Wherever there is a departure from this scheme, it is specifically provided so in the Act itself, such as, for instance, under Section 44 of the Act for the computation of profits and gains of life insurance business. No such separate provision is made with regard to the income referred to in Section 164A or Section 164(1). In other words, therefore, the concept of income chargeable to tax otherwise than as a constituent, duly processed, of the total income is foreign to the very scheme and structure of the Act. If that income is not to be computed in the manner laid down in the Act, and that is the very pith and substance of Shri Sathe's contention, the income itself would escape the charge of tax. To sustain this conclusion, we have the clear authority of the Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294.

Dealing with Section 45 of the Act, which is a charging section, the Supreme Court was pleased to observe: ... For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by Section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by Section 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision.

But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head.

11. In our view, therefore, the interpretation sought to be urged by Shri Sathe to the provisions of Sections 164A and 164(1) so as to take the income referred to in these provisions outside the scope of the total income is untenable. The true interpretation of the provisions of Section 164(1) and Section 164A in this context is that these provisions prescribe the rate of tax at which the income referred to is to be charged and that is at the maximum marginal rate as defined in Explanation 2 to Section 164(1). The contention is, therefore, rejected.

12. We shall now proceed to examine the question regarding the correct status of the assessee. Shri Bhide's case is that the status of the assessees has to be determined from amongst the categories enumerated in the definition of 'person' under Section 2(31) of the Act and that status should in law have been determined as that of individual and not as an AOP as taken by the authorities below. He develops his contention on the premise that the assessments have been framed on the trustees as representative assessees. Now an assessment on a representative assessee is deemed in terms of Section 161(1) to be made upon him in his representative capacity only and the tax is levied upon and recovered from him in like manner and to the same extent as would have been leviable upon and recoverable from the beneficiaries whom he represents. The correct interpretation of the phrase, 'in like manner and to the same extent' and its consequences with reference to the assessment framed on the trustees have been set down by the Supreme Court in the case of CWT v. Trustees of H.E.H. Nizam's Family Trust [1977] 108 ITR 555. One of these consequences is that the assessment of the trustees would have to be made in the same status as that of the beneficiaries whose interest is sought to be taxed in the hands of the trustees. The question, therefore, arises as to what would be the status in which the beneficiaries under the present trusts would be assessed. Would it be that of an AOPs? Shri Bhide contends that the law as regards the conception and meaning of AOPs has been laid down by the Supreme Court in the case of CIT v. Indira Balkrishna [1960] 39 ITR 546 and that is to quote from the ruling (Head Note): ... association of persons as used in Section 3 of the Income-tax Act, means an association in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains.

The Supreme Court was dealing with the relevant provisions of the Indian Income-tax Act, 1922, but ruling applies equally to the corresponding provisions of the 1961 Act. In the case of the present assessee, Shri Bhide argues that none of the characteristics of an AOPs, as set out in the ruling of the Supreme Court can be found. All that has happened is that certain shares of a company have been settled on trust, testamentary, non-testamentary or oral and the income receivable by the trustees on behalf of the beneficiaries accrues by way of dividends on these shares: there is, therefore, no voluntary association or joining together of persons with any common object or common purpose of earning or producing income. As such, the status of AOP ascribed to these assessees by the authorities below is erroneous.

13. Shri Bhide next goes on to contend that if the correct status is not that of AOPs, equally, the assessees cannot be held to constitute a BOI within the meaning of Clause (v) of Section 2(31). For this contention, he relies on the ruling of the Madras High Court in the case of CIT v. Deghamwala Estates [1980] 121 ITR 684. It was held in that case that mere execution of a document of sale by two or more persons owning the property jointly cannot bring the co-owners together as a BOI. Their Lordships proceeded further to hold that a clue to the interpretation of the term appeared to be contained in Section 47(2) of the Act, when it contemplates that the BOI whether incorporated or not must be capable of holding properties as an entity and of distributing them at the time when it dissolves. To quote from the ruling (Head Note): ... A common purpose, a common tie, actual or potential capacity to hold properties or disposable income would be the minimum requirement of a BOI. The purpose or aim in the context of the Income-tax Act should be to produce income or hold income-producing assets: These essential characteristics, according to Shri Bhide, are not to be found in the case of the beneficiaries and could not, therefore, be ascribed to the assessees.

14. Shri Sathe, on behalf of the department, counters these contentions on the ground that the beneficiaries constitute a group of individuals, a group which has been brought together in that character under the trusts, who are entitled to the income arising from the settled property held on their behalf by the trustees. The proper status, according to him, therefore, of such a group of persons or individuals would, properly speaking, constitute if not an AOP certainly a BOI. We have carefully considered the submissions on this question made by the rival parties. In our view, in the light of the ruling of the Supreme Court in the case of Indira Balkrishna (supra) cited above, it is futile to contend that the status of the beneficiaries can be taken as that of an AOP. Failing that, can they be called a BOI. The answer, to our minds, would clearly be in the negative, applying the ratio of the ruling of the Madras High Court in Deghamwala Estate's case (supra). We are further fortified in our view by the ruling of the Andhra Pradesh High Court in the case of Deccan Wine & General Stores v. CIT [1977] 106 ITR 111, the ruling of the Gujarat High Court in the case of CIT v.Harivadan Tribhovandas [1977] 106 ITR 494 and the ruling of the Punjab &Haryana High Court in the case of Meera & Co. v. CIT [1979] 120 ITR 564. Finally, we have to consider with respect another and a later decision of the Madras High Court on this question and that is in the case of N.P. Saraswathi Ammal v. CIT [1982] 138 ITR 19. The facts in that case were that the assessments were made on a family group consisting of a widow and her four sons who were legatees under a will.

The group was treated by the ITO as an AOP, But subsequently a plea was raised and entertained that their status was that of a BOI. Their Lordships after setting out the characteristics of a BOI as contemplated under the Act, held on the facts of the case before them that the Tribunal was right in its conclusion that the assessment should properly be made on the widow and her sons as a BOI. The factors taken into account for arriving at this conclusion as set out in the ruling (head note) were that: ... There was no evidence on record in this case that the widow was at any time aided by any of her sons, even after they had attained majority, in the conduct of the business. Further, even though the sons had the choice of demanding their share, which, if conceded, would have resulted in either the disruption of the business or in its disposal, the sons permitted the mother to continue the business. The fact that the integrity of the business continued with none of the legatees wishing to take his or her share and depart, was a clear indication that the mother and the children were still keeping in step as a BOI ...

This ruling, in our view, is of no assistance to the department to arrive at a conclusion that on the facts of the cases before us, the correct status of the assessee is that a BOI.15. It remains now to consider whether the correct status of the assessees is that of 'individual' as contended for by Shri Bhide. We have the clear authority of the Supreme Court for the proposition that the word 'individual' is wide enough to include a group of persons, CIT v. Sodra Devi [1957] 32 ITR 615 (SC), to which reference was made in the later ruling in the case of WTO v. C.K. Mammed Kayi [1981] 129 ITR 307 (SC). We have, therefore, no hestitation in accepting this contention. The correct status of the assessees, therefore, is that of individuals. It follows that there is no impediment to the claim of the assessees for allowance of the deduction under Section 80L while determining their total income.


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