Association of individuals in property co-ownership can attract income-tax assessment where the owners jointly manage property for income.

Co-owners who combine to hold, manage, and exploit property for income may be treated as an association of individuals under the Income-tax Act, 1922, where their arrangement goes beyond mere fortuitous co-ownership and resembles a joint enterprise. On that footing, the association can be regarded as the owner of the property for assessment under the provision taxing income from property. The Calcutta HC therefore answered the reference against the assessee and in favour of the revenue on both substantive issues.

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Issues: (i) Whether the owners of the property constituted an association of individuals within the meaning of Sections 3 and 55 of the Income-tax Act, 1922; (ii) Whether such association could be regarded as the owner of the property within the meaning of Section 9 of the Income-tax Act, 1922.

Issue (i): Whether the owners of the property constituted an association of individuals within the meaning of Sections 3 and 55 of the Income-tax Act, 1922.

Analysis: The expression was construed in its ordinary and natural sense. Persons who join together for a common purpose or common action may form an association of individuals. The co-owners had purchased and retained the property together, and had arranged for its management through powers of attorney for the common object of holding and exploiting it for income. The combination was treated as analogous to a joint enterprise or a body of co-adventurers rather than a mere fortuitous co-ownership.

Conclusion: The owners constituted an association of individuals within the meaning of Sections 3 and 55 of the Income-tax Act, 1922.

Issue (ii): Whether such association could be regarded as the owner of the property within the meaning of Section 9 of the Income-tax Act, 1922.

Analysis: Once the combination was found to be an association of individuals formed to hold and manage the property for gain, the property stood in the hands of that association for assessment purposes. The ownership position was therefore sufficient to attract assessment under the provision dealing with income from property.

Conclusion: The association was the owner of the property for the purposes of Section 9 of the Income-tax Act, 1922.

Final Conclusion: The reference was answered against the assessee and in favour of the revenue on the substantive questions decided.

Ratio Decidendi: A group of co-owners who combine and continue together for the common purpose of holding and managing property to earn income may constitute an association of individuals for income-tax assessment.

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