Gujarat High Court
Commissioner Of Income-Tax vs Himatlal Kapurchand And Ors. on 28 November, 1995
Author: S.K. Keshote
Bench: S.K. Keshote
JUDGMENT Rajesh Balia, J.
1. Following three questions have been referred to this Court for its opinion by the Tribunal, Ahmedabad 'C' Bench, at the instance of the Revenue for the asst. yr. 1968-69 :
"1. Whether, on the facts and in the circumstances of the case, the amount of Rs. 31,304 received by Shri Himatlal Kapurchand, Shri Rameshchandra Chakubhai and Shri Jayantilal Bhurabhai Patel is not assessable to tax in the hands of the said three individuals in the status of AOP or BOI ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal has been right in law in coming to the conclusion that the agreement to purchase land by three persons, namely, Shri Himatlal Kapurchand. Shri Rameshchandra Chakubhai and Shriram Jayantilal Bhurabhai Patel and receiving Rs. 31,304 on account of the ultimate sale of the said land to some other party by becoming a confirming party to the transaction did not constitute joint venture by the said three persons ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal has been right in law in coming to the conclusion that when the members constituting the AOP has been separately assessed, the ITO cannot assess the AOP as a separate entity ?"
2. No one has appeared for the assessee in spite of service. We have heard the learned counsel for the Revenue.
3. The assessee is an AOP. Three person, namely, Shri Himatial Kapurchand, Rameshchandra Chakubhai and Jayantilal Bhurabhai Patel are its members. They jointly agreed to purchase a piece of land from one farmer and was directly sold by the title holders to the third party at the request of the said three persons. On amount of Rs. 31,304 was paid to the aforesaid three persons as a result of the said transaction. The ITO was of the view that these three persons have combined in a joint enterprise to produce income and transaction according to him was in the nature of a joint venture. He treated their status as AOP vis-a-vis that joint venture and brought to tax the aforesaid amount in the hands of persons holding them to be AOP. Before the learned AAC it was contended inter alia that even if it was in existence as an AOP but in view of the fact that each of the member of the AOP had been assessed to tax in respect of his share in the income separately the ITO cannot assess the AOP as separate entity now. For coming to this conclusion, the AAC relied on the principles enunciated by the Supreme Court in the case of CIT vs. Murlidhar Jhawar & Purna Ginning & Pressing Factory (1966) 60 ITR 95 (SC) : TC 33R.860. The view of the AAC, was affirmed by the Tribunal on further appeal. Hence, the reference and the aforesaid questions before us.
4. In our opinion, answer to question 3 settles the controversy and the first two questions do not survive for decision.
5. It is the cardinal principle that the income-tax is to be charged on all incomes but it can be charged in the hands of some person only once and there could not be double taxation unless a clear intention to that effect appears as per the statute. If an AOP have purchased some land and in respect of it income-tax is charged, the same cannot be charged again in the hands of persons individually. So also if members who constitute AOP have been assessed to tax in respect of income received/receivable by AOP qua their share and that assessment has become final the AOP cannot be brought to tax. It is also to be noticed that in the case of AOP, it is for the ITO to choose either to tax AOP as one unit or to tax the members constituted separately in respect of their share.
6. In regard to the aforesaid position of law, there cannot be any controversy. In the case of Murlidhar Jhawar (supra), a question arose before Their Lordships in somewhat similar circumstances. Three persons. Murlidhar Jhawar, Pannalal Lahoti and Govindbhai carried on business in various commodities and each was assessed to tax to a third share for the asst. yr. 1954-55. Thereafter, the ITO has sought to assess them in the status of unregistered firm. The Revenue having failed before the Tribunal approached the High Court and the High Court held that the partners of an unregistered firm might be assessed individually or they might be assessed collectively in the status of an unregistered firm. The ITO could not further seek to assess the one income twice once in the hands of partners and again in the hands of an unregistered firm. In the case of State of Uttar Pradesh & Anr. vs. Raza Buland Sugar Co. Ltd. (1979) 118 ITR 50 (SC) reiterated the principle by holding "the principle that is applicable in tax statutes that income is subject to tax in the hands of same person only once. Thus, if an association or a firm is taxed in respect of its income the same income cannot be charged again in the hands of the members individually and vice versa. Trust income cannot be taxed in the hands of the settlor and also in the hands of the trustee or beneficiary or in the hands of both the trustees as well as the beneficiary. These principles are of course subject to any special provision enabling double taxation in the statutes.
7. The Tribunal has recorded unequivocally its finding that before the AAC the assessee took the stand that the members constituting the AOP have been separately assessed to tax on the amount in question. The fact was not disputed by the Department before the Tribunal. On these findings the Tribunal applied the aforesaid principle and upheld the contention of the assessee against the Revenue. We find no infirmity. It is not even the case of the Department that statute provides for two assessments in respect of income earned by AOP once in the hands of AOP and also in the hands of members constituting AOP, nor it is the case of the Revenue that the income in the hands of the persons constituting an AOP was assessed merely as a protective measure so that ultimately only one assessment would survive for implementation.
8. We, therefore, answer question 3 in affirmative that is to say in favour of the assessee and against the Revenue.
9. In view of the fact that our answer to question 3 is covered by law enunciated by the Supreme Court and no other view is possible, the other two questions referred to us remain of academic importance. Whether three persons named above constitute an AOP or not ceases to have any bearing on ultimate outcome. Since the amount received by three persons have already been subjected to tax and which have become final, the controversy whether it was in the nature of trade or not has also become of academic importance. We therefore, decline to answer question Nos. 1 and 2. No order as to costs.