Association of persons in family business continuation upheld where co-sharers united to run the enterprise through receivers.

Co-sharers who, by mutual volition, combined to continue a business with unity of control and a common profit-making purpose were treated as an association of persons for income-tax purposes. Mere joint receipt of income or co-ownership with defined shares was held insufficient; the decisive factor was their agreement to carry on the business as an undivided commercial asset through receivers on their behalf. On those facts, assessment of the business profits in the hands of the receivers under section 41(1) was valid, and the reference was answered against the assessee.

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Issues: Whether the profits from the business carried on after the death of the owner could validly be assessed in the hands of the joint receivers as income of an association of persons under the Income-tax Act, 1922.

Analysis: The relevant test for an association of persons is not mere joint receipt of income or co-ownership with defined shares, but a combination of persons who, by volition, unite in a common purpose or action to earn income, profits, or gains. The heirs inherited the business as an undivided commercial asset, desired its continued operation with unity of control, and arranged for receivers to carry it on on their behalf. On those facts, there was material to support the conclusion that the co-sharers had combined in a common purpose of carrying on the business for profit. Where such an association existed, section 41(1) permitted assessment in the hands of the receivers on the same basis as would apply to the persons represented by them.

Conclusion: The assessment of the business profits as income of an association of persons was valid, and the reference was answered against the assessee.

Ratio Decidendi: Co-sharers who, by mutual volition and for the common purpose of continuing a business with unity of control to earn profits, combine in that enterprise constitute an association of persons for income-tax purposes, and receivers carrying on the business on their behalf may be assessed on that basis under section 41(1).

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