Association of Persons requires voluntary combination; joint ownership of gifted property did not justify AOP assessment of minors' income.

Joint ownership of gifted property and mere joint receipt of income did not by themselves create an Association of Persons, because an AOP requires a voluntary combination of persons for the purpose of earning income. As no material showed the minors, directly or through a guardian, voluntarily combining for that purpose, the interest income was separately assessable in the hands of each minor. On the same facts, the wealth-tax assessment framed in the status of an Association of Persons also failed, since that basis of assessment was unsustainable.

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Issues: (i) Whether the interest income arising from the jointly gifted properties received by three minors was assessable in the status of an Association of Persons or had to be assessed separately in the hands of each minor; (ii) Whether the wealth-tax assessment in the status of an Association of Persons could stand.

Issue (i): Whether the interest income arising from the jointly gifted properties received by three minors was assessable in the status of an Association of Persons or had to be assessed separately in the hands of each minor.

Analysis: The gifted property was made jointly to the three minors, and the transfer created joint ownership in the property rather than a Hindu undivided family. The governing principle applied was that an Association of Persons requires a voluntary combination of two or more persons for the purpose of earning income. Mere joint receipt of income from jointly owned property does not by itself establish such an association. The reference to the rule of equal interests in jointly transferred property supported the inference that each minor had an equal proprietary interest, but there was no material to show that the minors, acting through any guardian, voluntarily combined for the earning of interest income.

Conclusion: The income was not assessable as that of an Association of Persons and had to be treated as separately assessable in the hands of the minors; the assessee succeeded on this issue.

Issue (ii): Whether the wealth-tax assessment in the status of an Association of Persons could stand.

Analysis: Since the unit was held not to be a Hindu undivided family and no Association of Persons was established on the facts, the basis for assessment in that status failed. The assessment could not be sustained on the footing adopted by the revenue authority.

Conclusion: The wealth-tax assessment in the status of an Association of Persons was not sustainable and was set aside; this issue was also decided in favour of the assessee.

Final Conclusion: The common finding was that no Association of Persons came into existence on the facts, the income belonged to the minors with separate proprietary interests, and the assessments made in the impugned status could not stand.

Ratio Decidendi: Joint ownership or joint receipt of income does not constitute an Association of Persons unless there is a voluntary combination of persons for the purpose of earning income.

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