Association of persons can arise among co-heirs where joint management and common enjoyment show a shared enterprise.

Co-heirs with ascertainable shares may still be treated as an association of persons where the proved facts show joint management, joint letting of property, common receipt of rent, no actual separation of shares in revenue records, and common dealing with income from a shared fund. Mere co-ownership does not by itself rule out that character; the determination depends on the cumulative effect of the parties' conduct and the surrounding facts, including their own returns and prior treatment. On those facts, the assessees were held to constitute an association of persons within section 3 of the Indian Income-tax Act, and the issue was answered in favour of the Revenue.

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Issues: Whether, on the facts found, the assessees could be validly assessed as an association of persons within the meaning of section 3 of the Indian Income-tax Act.

Analysis: The assessees were co-heirs of a Muhammadan estate, but the factual matrix went beyond mere inheritance of specific shares. The property was jointly managed, leases were granted jointly, rent receipts stood in joint names, the revenue records did not show actual separation of shares, and the income was dealt with from a common fund without strict distribution according to shares. The Court held that mere co-ownership with ascertainable shares did not by itself exclude the existence of an association of persons, and that the question depended on the cumulative effect of the proved facts and the parties' own conduct, including their returns and prior treatment as an association.

Conclusion: The assessees constituted an association of persons within the meaning of section 3 of the Indian Income-tax Act, and the question was answered against the assessees and in favour of the Revenue.

Ratio Decidendi: A body of co-heirs with ascertainable shares may nevertheless be an association of persons where the proved facts show conscious joint management, joint enjoyment of income, and conduct indicating a common enterprise.

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