Association of persons in inherited business upheld where co-heirs continued a single enterprise with mutual consent and common control.

Co-heirs who, by mutual consent, continued an inherited beedi business as one integrated undertaking with unity of control were treated as carrying on a joint venture. The business was not capable of division, and its continuation through receivers did not break continuity or alter the character of the income. The pendency of partition or administration proceedings was irrelevant because the enterprise remained a single commercial concern managed for a common purpose of earning income. On that footing, the income was assessable in the hands of an association of persons, and separate taxation of the co-heirs was rejected.

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Issues: Whether the income from the inherited beedi business, carried on by the co-heirs through receivers with mutual consent and unity of control, was assessable as the income of an association of persons.

Analysis: The business was not capable of division and was continued as a single commercial undertaking after the death of the owner. The co-heirs did not break continuity of the business, and their conduct showed a common intention to preserve and carry on the enterprise as one unit. Under the governing test for an association of persons, persons who combine in a joint enterprise to earn income, and who by consent continue to manage property or business as a joint venture, fall within the charging provision. The pendency of partition or administration proceedings did not alter the character of the business income, because the business continued to be carried on as one integrated concern under common control.

Conclusion: The income was rightly assessed as the income of an association of persons, and the contention that the co-heirs should be taxed separately failed.

Final Conclusion: The assessment of the business income as that of an association of persons was upheld, and the appeals were dismissed with costs.

Ratio Decidendi: Co-heirs who, by mutual consent, continue an inherited business as a single unit with unity of control and a common purpose of earning income constitute an association of persons for income-tax purposes.

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