Association of Persons status controlled property income treatment and supported assessment under the applicable scheme.

The assessee's status was treated as an association of persons rather than a firm, because the Tribunal was entitled to determine the correct status and the Department's consistent treatment in earlier and later years supported that view. Rental income from the property was then assessable under the property-income scheme, not as income from other sources, as that consequence followed from the accepted status. Section 26 was also held applicable to the assessment year 1962-63 on the assessee's case. The reference was answered wholly in favour of the assessee, and the Department's challenge to the Tribunal's determinations failed.

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Issues: (i) Whether the assessee's status was to be taken as an association of persons rather than a firm; (ii) whether rental income from the property was assessable as income from property and not as income from other sources; (iii) whether section 26 applied to the assessment year 1962-63.

Issue (i): Whether the assessee's status was to be taken as an association of persons rather than a firm.

Analysis: The Tribunal had jurisdiction to determine the correct status of the assessee. The departmental treatment of the assessee in earlier and later years as an association of persons supported the Tribunal's conclusion, and that conclusion was consistent with the accepted practice of assessment.

Conclusion: The issue was answered in the affirmative and in favour of the assessee.

Issue (ii): Whether rental income from the property was assessable as income from property and not as income from other sources.

Analysis: Once the assessee was held to be assessable as an association of persons, the consequence followed that the rental income from the property had to be separately assessed in accordance with the applicable scheme of assessment, and not treated as income from other sources.

Conclusion: The issue was answered in the affirmative and in favour of the assessee.

Issue (iii): Whether section 26 applied to the assessment year 1962-63.

Analysis: The question was answered along with the connected issues and the court accepted the assessee's position for the assessment year in question.

Conclusion: The issue was answered in the affirmative and in favour of the assessee.

Final Conclusion: The reference was answered wholly in favour of the assessee, and the departmental challenge to the Tribunal's determinations failed.

Ratio Decidendi: Where the assessee's status had been consistently accepted in earlier and later years, the Tribunal could determine that status accordingly, and the resulting tax treatment of the rental income followed from that status under the applicable provisions.

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