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Issues: (i) whether the assessees, being three widows who inherited their husband's estate, could be assessed as an association of persons in respect of the income from the estate; (ii) whether income from immovable property owned by them with definite and ascertainable shares could be assessed as an association of persons notwithstanding the general charge under the Income-tax Act.
Issue (i): whether the assessees, being three widows who inherited their husband's estate, could be assessed as an association of persons in respect of the income from the estate.
Analysis: The relevant test is whether the persons sought to be assessed have earned the income by reason of their association. Joint ownership or joint receipt of income does not by itself establish that the income was produced by an association of persons. In the case of inherited property, the widows took the estate as joint tenants, but the dividend and interest income could not be said to have been generated by any joint act or common venture of theirs. Mere management of the estate, without more, was insufficient to convert the recipients into an association of persons for tax purposes.
Conclusion: The assessees were not liable to be assessed as an association of persons in respect of the income in question.
Issue (ii): whether income from immovable property owned by them with definite and ascertainable shares could be assessed as an association of persons notwithstanding the general charge under the Income-tax Act.
Analysis: Where property is owned by two or more persons and their respective shares are definite and ascertainable, the statutory exception applies and such persons are not to be assessed as an association of persons in respect of that property. The share of each person in the property income must instead be included in that person's own total income. On that basis, the property income of the widows could not be brought to assessment in the status of an association of persons, and the earlier view treating them as such was erroneous.
Conclusion: The property income had to be assessed separately in the hands of the individual widows and not as income of an association of persons.
Final Conclusion: The reference was answered in favour of the assessees, and the assessment of the widows as an association of persons was rejected.
Ratio Decidendi: An association of persons is taxable only where the persons concerned have, by their associated activity, earned or helped to earn the income; mere joint ownership, joint possession, or receipt of income does not suffice, and where shares in property are definite and ascertainable, the statutory exclusion prevents assessment of that property income as an association of persons.
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