Association of persons test applies where business, purchases, sales, and profits are jointly carried on and shared.

A body of persons that jointly carries on business, makes joint purchases and sales, and first ascertains profits on a common account before distributing them according to agreed shares or capital contributions constitutes an association of persons for tax purposes. The Tribunal's factual finding that the cloth import and distribution activity was conducted on this joint basis brought the group within that category, and official appointment under a district scheme did not alter that character. The group was therefore liable to be assessed to income-tax and excess profits tax as an association of persons, with the answer against the assessee and in favour of the Revenue.

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Issues: Whether the Buldana District Main Cloth Importers' Group constituted an association of persons and was liable to be assessed to income-tax and excess profits tax in that status.

Analysis: The Tribunal found that the import and distribution of cloth were carried on on a joint basis, with purchases and sales made jointly, profits first ascertained on the joint account, and then distributed according to the agreed shares or capital contributions. That factual finding brought the group within the meaning of an association of persons. The circumstance that the members had been appointed under a district scheme and were subject to official control did not detract from the fact that they jointly carried on the business and earned profits from it.

Conclusion: The group was an association of persons and was rightly assessed to income-tax and excess profits tax; the answer was against the assessee and in favour of the Revenue.

Ratio Decidendi: A body of persons who jointly carry on a business, with joint purchases, joint sales, and joint ascertainment and distribution of profits, constitutes an association of persons for tax purposes, even if the business is conducted under an official scheme or control.

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