Mere co-ownership does not create an association of individuals where heirs simply collect rent and share income separately.

Mere co-ownership of inherited property under Mohammadan law, without partition, did not by itself create an association of individuals for income-tax purposes under the Income-tax Act, 1922. The Court held that a common purpose or joint enterprise for mutual profit was necessary; here, rents were collected through a manager and the net income was divided according to each heir's share. As there was no business concern or other combined venture, the assessees were not assessable as a single unit and had to be assessed separately on their individual shares.

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Issues: Whether co-heirs who inherited property under Mohammadan law, kept it in joint ownership, and employed a manager to collect rent constituted an association of individuals assessable as a single unit, or whether they were liable to be assessed separately on their respective shares.

Analysis: The reference concerned an assessment year governed by the Income-tax Act, 1922. The Court held that mere co-ownership and absence of partition did not by themselves create an association of individuals. What was required was some common purpose or combination amounting to a joint enterprise for mutual profit. The facts found showed that the rent was collected through a munshi and, after expenses, the net income was distributed according to the respective shares. There was no evidence of a business concern or joint venture. The authorities relied upon by the revenue were distinguished on their facts, and it was emphasised that the question must be decided on the particular findings in each case.

Conclusion: The assessees did not form an association of individuals and were liable to be separately assessed on their individual shares.

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