Commissioner Of Income- Tax, Bombay vs Smt. Indira Balkrishna on 14 April, 1960
Where there is a combination of persons formed for the promotion of a joint enterprise, in other words, when co-adventurers are banded together in common action, they are assessable as an "association of persons" when they do not in law constitute a partnership. Joining together of the members of the group, out of their volition
or free will, for Carrying on the business is the sine qua non for the existence of an association of persons. The fact that an association emerges as a result of an order of the court appointing a receiver, or does a business under a scheme evolved and controlled by a Government authority, or is necessitated by quota regulations, is immaterial. The Supreme Court had an occasion to consider the meaning of this expression in the case of CIT v. Indira Balkrishna [1960] 39 ITR 546 (SC). After reviewing the case-law on the point it was held that in order to constitute an association, persons must join in common purpose or common action and the object of the association must be to produce income. It is not enough that the persons receive the income jointly. It was also observed that there is no formula of universal application as to what facts, how many of them and of what nature are necessary to come to a conclusion that there is an association of persons. It must depend on the particular facts and circumstances of each case as to whether that conclusion can be drawn or not.