COMMISSIONER OF INCOME TAX, vs. M/S. G.R.K.PRASAD AND OTHERS

O/TAXAP/176/2003 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 176 of 2003

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ NARESH G. MODI....Appellant(s) Versus I.T. OFFICER....Opponent(s) ================================================================ Appearance: MR SN DIVATIA, ADVOCATE for the Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 19/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. The appellant-assessee has preferred this appeal, challenging the order of the learned Page 1 of 7

O/TAXAP/176/2003 JUDGMENT ITAT, Ahmedabad Bench “C” (for short, ‘the Tribunal’), Dated : 21.02.2003, rendered in ITA No. 3357/Ahd/97 for the A.Y. 1991-92, whereby, the Tribunal dismissed the appeal filed by the assessee. 2. The brief facts of the case are that the assessee filed his return of income for the A.Y. 1991-92 on 25.07.1991, declaring his total income at Rs.1,08,095/-. Pursuant thereto, the assessee was issued a notice under Section 143(2) of the Income Tax Act, 1962(‘the Act’, for short). The assessee attended the proceedings along with his advocate, and then, submitted a revised return declaring his income at Rs.95,005/-. Here, it may be noted that in the original return, Dated : 25.07.1991, the assessee had claimed the status of Association of Persons (hereinafter referred to as ‘A.O.P.’). However, at the time of filing the revised return, the assessee claimed the status of an individual and sought deduction of Rs.13,000/- under Section 80L of the Act. The AO, however, rejected the claim of the assessee and assessed his net income at Rs.1,08,095/-. Being aggrieved with the same, the assessee approached the CIT(A) by way of an appeal, but, CIT(A) dismissed the appeal of the assessee. The assessee, hence, approached the Tribunal, wherein, the Tribunal passed the impugned order. Page 2 of 7

O/TAXAP/176/2003 JUDGMENT Therefore, the assessee preferred the present appeal. 3. At the time of admission, this Court framed following questions of law; “1. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the appellant should be assessed in the status of "Association of Persons" instead of the status of "Individual" under section 168 of the Income-tax Act, 1961 as there were more than one Executors of the Estate of the Late Shri Dayabhai B. Modi? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding that the appellant was not entitled to deduction under section 80L of the Income-tax Act, 1961 in view of the status of the assessee being "Association of Persons.” 4. Mr. Divatia, learned Advocate for the appellant, submitted that the CIT(A) as well as the Tribunal committed a grave error in passing the impugned order, inasmuch as it failed to appreciate the provisions of Section 168 of the Act in proper perspective. He submitted that the Tribunal erred in holding that the executors were to be assessed as ‘AOP’, on the ground there being more than one executor. He submitted that the Tribunal ought to have held that the assessee Page 3 of 7

O/TAXAP/176/2003 JUDGMENT is entitled to deduction under Section 80L of the Act. He submitted that the Tribunal wrongly held that the judgment relied on by the assessee in “COMMISSIONER OF INCOME TAX VS. G.B.J. SETH AND ANOTHER”, 133 ITR 192 (MP), which also deals with the provisions of Section 168 of the Act, would not apply to the case on hand. He, therefore, submitted that the Tribunal ought to have directed the AO to assessee the assessee as an ‘Individual’. 5. In support of his submission, Mr. Divatia placed reliance on a decision of the Apex Court in “COMMISSIONER OF INCOME TAX VS. GOVINDBHAI MAMAIYA”, [2014] 367 ITR 498 (SC). In that case the assesses were brothers and they came to inherit certain land owned by their late father by operation of law. Aforesaid land came to be compulsorily acquired by the Government on payment of some compensation towards the same to the assesses. The revenue sought to assesses the assesses as ‘Association of Persons’ in respect of the income received by them due to acquiring of their land by the Government. The assessee approached the High Court against the action of the Revenue and the High Court answered that issue in favour of the assessee. The revenue carried the matter before the Apex Court and the Apex Court held that the income received by the Page 4 of 7

O/TAXAP/176/2003 JUDGMENT assesses by way of such an act of the government cannot be said to be an income from any business venture and that it cannot be said that they had formed an association to generate income. The Apex Court, further, hold that the elements constituting the association of persons were absent in that case and upheld the order of the High Court to that extent, holding that the assesses were to be assessed as ‘individuals’. 6. On the other hand, Mr. Mehta, learned Advocate for the Revenue, supported the orders passed by the CIT(A) as well as the Tribunal, inviting our attention to the provisions of Section 168 of the Act and submitted that the appeal be dismissed. 7. Heard learned Counsels for the parties and perused the material on record, including the orders of the CIT(A) and the Tribunal. Before adverting to the merits of the matter, here, it would be relevant to refer to Section 168 of the Act, which reads as under; “Executors. 168. (1) Subject as hereinafter provided, the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor,- (a) if there is only one executor, then, Page 5 of 7

O/TAXAP/176/2003 JUDGMENT as if the executor were an individual; or (b) if there are more executors than one, then, as if the executors were an association of persons; ...” 8. Thus, from a bare perusal of the provisions of Section 168 of the Act, it becomes clear that in a case, where, there is only one executor, such executor is to be assessed as an ‘individual’, whereas, in a case, where, there are more than one executors, they are to be assessed as ‘Association of Persons’. 9. From the record it transpires that in the case on hand, there are as many as five executors. Thus, the assesses, herein, would be covered by the provisions of Section 168(1)(b) and not by the provisions of Section 168(1)(a). Thus, when the Act itself provides that in case of more than one executors, they are to be assessed as association of persons, it cannot be said that the CIT(A) or the Tribunal committed any error in passing the impugned order. 10. So far as the judgment of the Apex Court relied on by Mr. Divatia in case of “COMMISSIONER OF INCOME TAX VS. GOVINDBHAI MAMAIYA”(Supra) is concerned, in that case the Supreme Court had no occasion to consider the provisions of Section Page 6 of 7

O/TAXAP/176/2003 JUDGMENT 168 of the Act. As regards the decision of MP High Court relied on by Mr. Divatia in case of “COMMISSIONER OF INCOME TAX VS. G.B.J. SETH AND ANOTHER” (Supra) is concerned, in view of the clear provisions of Section 168(1)(b) of the Act, same would not apply to the facts of the present case. 11. In the result, the appeal fails and is DISMISSED and the questions are answered against the appellant-assessee and in favour of the respondent-revenue, accordingly. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 7 of 7