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income-tax Officer Vs. K. Ramanadham - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1984)10ITD810(Hyd.)
Appellantincome-tax Officer
RespondentK. Ramanadham
Excerpt:
.....aggregate consideration received was rs. 1,23,700 and the particulars of the purchasers and the sale consideration received are as under :name of the purchaser extent of site sale consideration sq. yds. rs.2. o. prasada rao, govindarajula- 310 3,100 pet, warangal dt.5. sbi staff co-operative housing 3,105 31,200 society ltd., yellareddiguda branch,7. -do- 3,093 31,200 ________ _________total 12,341 1,23,700(balance is lost for roads) smt. nirmala filed her individual return of income before the ito, in which she showed one-fourth share from the surplus. on 15-1-1982, the assessment was duly made on her as individual accepting the income returned of rs. 20,610. she had, while filing the return, declared full details of the sale and that she had only a one-fourth share. k.ramanadham.....
Judgment:
1. This appeal is by the revenue. To appreciate the contentions, we would set out in brief certain facts.

2. On 2-7-1967, by a registered purchase deed executed by one Nalini Bai and six others and one Ajay Kumar, Shri K. Ramanadham, Smt. P.Nirmala, who is a doctor and Smt. K. Pramiladevi purchased land measuring 13,596 sq. yds., i.e., about 3 acres. The land was comprised of 22 plots. It was categorically stated in the purchase document that out of the total consideration of Rs. 58,000, Rs. 29,000 was being contributed by K. Ramanadham and the balance of Rs. 29,000 was being contributed equally by Smt. Nirmala and Smt. Pramila Devi. These persons held the land without making any improvements or modifications thereto and sales were effected on 28-12-1979 in 7 items. The aggregate consideration received was Rs. 1,23,700 and the particulars of the purchasers and the sale consideration received are as under :Name of the purchaser Extent of site Sale consideration Sq. Yds.

Rs.2. O. Prasada Rao, Govindarajula- 310 3,100 pet, Warangal Dt.5. SBI Staff Co-operative Housing 3,105 31,200 Society Ltd., Yellareddiguda Branch,7.

-do- 3,093 31,200 ________ _________Total 12,341 1,23,700(Balance is lost for roads) Smt. Nirmala filed her individual return of income before the ITO, in which she showed one-fourth share from the surplus. On 15-1-1982, the assessment was duly made on her as individual accepting the income returned of Rs. 20,610. She had, while filing the return, declared full details of the sale and that she had only a one-fourth share. K.Ramanadham also filed an individual return and a protective assessment was made in his case. Thereafter, the ITO was of the view that the three persons constituted an AOP and, as such, action under Section 148 of the Income-tax Act, 1961 ('the Act'), was taken. It was contended on behalf of the assessee now in appeal that they did not constitute an AOP and it was also contended that since assessment on individuals had been made earlier, no action could be taken against the AOP.Eventually, the ITO did not accept the contention, treated the assessee as AOP, treated the transaction as one in the course of business and, after allowing deduction from the aggregate sale consideration of Rs. 1,23,700 of the purchase price of Rs. 58,000, brought to tax income of Rs. 65,700.

3. The assessee appealed and contended before the AAC that they did not constitute an AOP and further, since one of the members had been assessed, no action could be taken against the AOP. It was also contended that the surplus was income from capital gains. After discussing the various case laws on the point, the AAC held that since Smt. Nirmala had been assessed earlier in respect of her share, the ITO was precluded from making an assessment on AOP. On the point of the nature of the surplus, the AAC held that it was income from business.

Eventually, the AAC gave two findings : (a) the ITO should assess the members separately taking their respective shares into account and (b) the ITO was right in his conclusion that there was an adventure in the nature of trade from which surplus had resulted.

4. The revenue is in appeal. It is contended that the AAC erred in holding that the profit on sale of land could not be assessed as AOP.The assessee has not filed any cross-objection, but the learned counsel submitted that they could get a copy of the order of the AAC only a few days back. He stated that it would be open to the assessee to file an appeal on points decided against the assessee and they would consider the matter in due course. Our present decision is, therefore, confined only to the contention of the revenue that the AAC erred in holding that no assessment could be made on AOP.5. We have set out the facts. We have to state only one more fact and that is, that in each of the seven sale deeds, it was categorically mention-ed that the three parties, viz., Ramanadham, Nirmala and Pramiladevi, would be getting pro rata share of the sale proceeds. As a matter of fact, in respect of three sales of Rs. 31,200, Rs. 49,200 and Rs. 31,200, aggregating to Rs. 1,11,600, which were to the State Bank of India Staff Co-operative Housing Society Ltd., in each case separate cheque was issued in respect of pro rata sale consideration to the three persons.

6. The submission of the learned departmental representative was that since the property was purchased jointly and sold jointly, an AOP came into being. He stated that land was capable of division and each of the parties could have had a portion of the land or sold plots specifically allocated to them on purchase. Not having done so, he stated, the three persons had joined together to earn income and, therefore, constituted an AOP. The learned counsel for the assessee, on the other hand, submitted that there was no such intention to earn income and throughout the share of each person in the property was specified. In this regard, a reference was also made to the provisions of Section 45 of the Transfer of Property Act, 1882.

7. We have considered the rival submissions. Section 45 reads as under : 45. Joint transfer for consideration.-Where immovable property is transferred for consideration to two or more persons and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively, entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund ; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively, entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced.

In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property.

This is a case where, according to the original purchase deed, consideration was paid out of separate funds belonging to each of the three persons. The purchase deed specifically mentioned the amounts contributed. Therefore, Ramanadham had a half share since he contributed Rs. 29,000. Rs. 29,000 was jointly contributed by the two ladies and, therefore, they have to be presumed to be equally interested in the property. There was no contract to the contrary. This is a case, therefore, where at the time of purchase, by way of conduct, it is clear that each person had a definite share in the property. The property was held for several years and thereafter, without any improvements, etc., the property was sold. At the time of sale also, each person received sale consideration pro rata. There was, therefore, no coming together to receive the sale consideration as a unit. It was received pro rata separately. On facts, therefore, we have to come to the conclusion that there was no AOP. Purchase was made by each of the persons out of his or her own funds and sale proceeds were received pro rata. Merely because a common purchase deed and common sale deed were executed, that by itself would not be sufficient to hold that there was an AOP.8. Apart from the factual finding arrived at by us, which is on the material already on record, we have to agree with the assessee that inasmuch as one of the members was assessed earlier in respect of share income and full facts were set out, the ITO was precluded for making an assessment on the AOP. Authority for this proposition is the decision of the Andhra Pradesh High Court in the case of (1) Atchaiah v. ITO [1979] 116 ITR 675. The learned departmental representative submitted that there is a contrary decision of the Delhi High Court in the case of Punjab Cloth Stores v. CIT [1980] 121 ITR 604. We are bound by the decision of the Andhra Pradesh High Court as far as the prohibition to make an assessment on the is concerned, when an assessment has been made on one of the members earlier. Therefore, the revenue cannot succeed on this point.


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