Taxability of shared income depends on same income in same hands; a payment covenant alone does not create partnership or AOP.

A receipt is not protected from tax merely because similar income was taxed in another person's hands; double taxation is barred only when the same income is taxed twice in the same hands and in the same juridical character, so the assessee's receipt remained taxable. The agreement also did not create a partnership or sub-partnership, because there was no joint carrying on of the managing agency business and no partnership inter se. It likewise did not amount to an association of persons, as the arrangement was only a covenant to pay a fraction of another's income and showed no common design or joint venture.

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Issues: (i) Whether the amount received by the assessee could escape tax on the ground of double taxation; (ii) whether the agreement created a partnership or sub-partnership between the assessee and the other party; (iii) whether the arrangement amounted to an association of persons.

Issue (i): Whether the amount received by the assessee could escape tax on the ground of double taxation.

Analysis: The principle against double taxation applies only where the same income is taxed more than once in the hands of the same person in the same passage of income. A receipt which has already borne tax in the hands of one person does not become immune from tax when it reaches another person under a different juridical character. The amount received by the assessee was not received as managing agency remuneration, but under a separate contract by which a fraction of the other party's income was made payable to it.

Conclusion: The amount was taxable in the assessee's hands and the plea of double taxation failed.

Issue (ii): Whether the agreement created a partnership or sub-partnership between the assessee and the other party.

Analysis: A partnership requires an agreement to share the profits of a business carried on by all or any of the parties acting for all. The document did not show that the assessee and the other party agreed to carry on the managing agency business jointly, nor did it show any agency relationship by which one carried on the business on behalf of the other. A sub-partnership also presupposes a valid partnership inter se, which was absent here.

Conclusion: No partnership or sub-partnership was created.

Issue (iii): Whether the arrangement amounted to an association of persons.

Analysis: An association of persons requires a common design or joint enterprise to earn income. The agreement was only a contract for payment of a fixed fraction of the other party's income and did not show any joint venture for earning the managing agency remuneration. The allowance of a salary deduction did not establish common management or joint endeavour.

Conclusion: The arrangement did not constitute an association of persons.

Final Conclusion: The reference was answered against the assessee, as the receipt was taxable and the agreement did not create either a partnership or an association of persons.

Ratio Decidendi: A receipt remains taxable in the hands of a subsequent recipient unless the recipient can show that the same income was being taxed in the same passage and in the same juridical character; a mere covenant to pay a share of another person's income does not by itself create a partnership, sub-partnership, or association of persons without a joint business carried on by all or by some acting for all.

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