Association of persons requires a common income-earning enterprise; mere joint receipt of inherited income is insufficient.

Three widows holding inherited property with equal, definite shares and receiving income separately were not an association of persons for income-tax purposes. Section 3 of the Indian Income-tax Act, 1922 requires more than joint receipt of income: there must be a common purpose or joint enterprise formed to produce income, profits or gains. On the facts, there was no such combination in respect of shares, dividends, or interest on deposits. The assessment on the footing that they constituted an association of persons was therefore invalid.

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Issues: Whether the three widows, as co-heirs managing the inherited estate and receiving its income, constituted an association of persons assessable under section 3 of the Indian Income-tax Act, 1922.

Analysis: An association of persons under section 3 requires more than mere receipt of income by several persons. The essential feature is that two or more persons must join in a common purpose or common action, and the combination must be one formed to produce income, profits or gains. The facts showed no joint enterprise in respect of the shares, dividends and interest on deposits. The widows had equal and definite shares, and the record showed separate holdings in their names. As to the immovable property, the appellate authority had already held that section 9(3) applied, and that finding was not challenged by the Department. On the material before the Court, mere joint receipt of income did not establish an association of persons.

Conclusion: The widows were not an association of persons within the meaning of section 3, and the assessment on that footing was invalid.

Ratio Decidendi: An association of persons for income-tax purposes exists only where two or more persons combine in a common purpose or joint enterprise to earn income, and mere joint receipt or common enjoyment of income is insufficient.

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