COMMISSIONER OF INCOME-TAX, BOMBAY vs. SMT. INDIRA BALKRISHNA

CIVIL APPEAL No. 249/1958Supreme Court[1960] 3 S.C.R. 51314 April 1960Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH9 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the High Court correctly answered the question in the negative. The Court affirmed the crucial test for determining an association of persons under Section 3 of the Income-tax Act, which requires two or more persons to join in a common purpose or common action, with one of the objects being to produce income, profits, or gains. The Court found no evidence that the three widows had combined in a joint enterprise to produce income. Their only action was receiving dividends and interest jointly, but they had done no act that helped to produce income from the shares and deposits. Therefore, they could not be held to have the status of an association of persons. The appeals were dismissed.

What were the facts?

The assessee, Commissioner of Income-tax, Bombay, appealed against a High Court judgment concerning the assessment of income for the assessment years 1950-51 and 1951-52. The income originated from the estate of the deceased Balkrishna Purushottam Purani, inherited by his three widows: Indira, Ramluxmi, and Prabhuluxmi. The estate comprised immovable properties, shares, deposits, and a share in a registered firm. Returns were filed showing the status as "individual" or "association of persons." The Income-tax Officer assessed the income under the status of "association of persons." The Appellate Assistant Commissioner accepted that income from property should be assessed separately but rejected the argument for separate assessment of the widows. The Income-tax Appellate Tribunal held that the widows should be assessed as an "association of persons," disagreeing with the Appellate Assistant Commissioner on the applicability of Section 9(3). The High Court, however, held that the widows could not be assessed as an "association of persons."

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment made on the three widows of Balkrishna Purushottam Purani in the status of an association of persons is legal and valid in law? (Question of law) Assessee's contentions (Revenue's contentions): The Revenue argued that the High Court erred in its interpretation of what constitutes an association of persons for tax purposes. It was submitted that the existence of a common source of income in which two or more persons are interested, whether as owners or otherwise, is the real test, irrespective of whether their shares are specific and definite or whether there is a scheme of management. The Revenue contended that if persons interested in a common source of income come to an arrangement, express or tacit, by which they divide the income before it emanates from the source, the association continues. Revenue's contentions (Assessee's contentions): The Revenue argued that the High Court was in error in holding that for an association of persons to be liable to tax, they must earn or help to earn income by reason of their association, and that mere receipt of income is insufficient. The Revenue contended that the High Court's statement that the Department must fail if it stops short at mere receipt of income was incorrect.

Which sections of the Income-tax Act were involved?

Section 3,Section 9(3)

AI-generated summary — verify with the full judgment below

• ... > • I 3 S.C.R. SUlJREME COURT REPORTS 513 gratuity for other modes' oi termination of service.

That was the method followed in the award that fell for comideration fr1 Brahmachari's case.

That method has however not been followed in the award that we · have to. consider here. ln this case there is no specific reference 'in the award to retrenchment as such: The reasonable conclusion from the scheme as · drawn up is that the gratuity that could be claimed under this award by retrenched workmen because of the fact that retrenchment is also one kind of termination !l'of service vl'ithin the meaning of the award was intended to be in addition to the retrenchment compensation and not in lieu thereof.

The decision in Brahmachari.'s case on the special facts of the award therein is therefoi;e of no assistance to the appeUai1t. \Ve are bound to hold on an exami- nation of the award in the · present case that the gratuity which the respoi1dent claims on the basis of the award is distinct from and in addition to the retrenchment compensatioh he has received. v\Te are of opinion therefore that the Tribunal was right in holding that the responden

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 3

All 288 judgments and leading authorities on Section 3 →

Recent GST High Court judgments

Search GST case law →