Joint receivers carrying on business together may be treated as an association of persons for income tax purposes.

Joint court receivers authorised to carry on a snuff business and in fact conducting it together can constitute an association of persons if they combine in common action to produce income. Section 10 of the Income-tax Act, 1922 applies to the substantive charge where the business is carried on in that joint capacity, while section 41 is only a machinery provision for assessment and recovery from a receiver receiving income on behalf of others. On these facts, the receivers' income was properly assessable as income of an association of persons, and the assessment was sustainable under section 10 read with section 41.

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Issues: Whether the income from the snuff business managed by joint court receivers could be assessed in their hands as an association of persons under section 10 of the Income-tax Act, 1922, or whether the assessment was properly made under section 41 of that Act.

Analysis: An association of persons under section 3 of the Income-tax Act, 1922, denotes persons who join in a common purpose or common action to produce income, profits or gains. Even where receivers are appointed by court, they may still constitute an association of persons if, on the facts and the terms on which they function, they combine and carry on the business jointly in order to produce income. Section 10 applies only where the assessee carries on the business in its own right, while section 41 is only a machinery provision dealing with levy and recovery from a receiver who receives income on behalf of others. On the facts, the receivers were authorised to carry on the business normally and did so jointly; the income was produced by their own acts and the proper view was that they were an association of persons. The assessment was therefore supportable under section 10, and the jurisdiction to assess them was under section 41.

Conclusion: The receivers were rightly assessable as an association of persons, and the assessment stood under section 10 read with section 41 of the Income-tax Act, 1922.

Ratio Decidendi: Joint receivers who are authorised to carry on a business and in fact conduct it jointly so as to produce income can constitute an association of persons, and where section 41 is attracted it operates as a machinery provision without altering the substantive charge under section 10.

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