Indeterminate shares in maintenance receipts can attract taxation as an association of persons under the 1922 Income-tax Act.

Where a decree gives several persons a joint right to maintenance without fixing their respective shares, the shares are indeterminate or unknown. In that situation, the proviso to section 41 of the Indian Income-tax Act, 1922, deems the income taxable as if it were received by an association of persons, even if there is no actual association in fact. The Calcutta High Court therefore upheld assessment on the footing that the maintenance receipts were jointly receivable by persons with indeterminate shares, and the challenge based on the ordinary meaning of association of persons failed.

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Issues: Whether the maintenance receipts under the joint decree were received by the assessees in determinate shares or in indeterminate shares, and whether the assessments could be made on them as an association of persons under the Indian Income-tax Act, 1922.

Analysis: The decree conferred a joint right to receive maintenance and did not allocate fixed or proportionate shares to each beneficiary. On that construction, the individual shares were indeterminate or unknown. Even if the assessees had not associated in a common purpose to produce the income, the proviso to section 41 of the Indian Income-tax Act, 1922, created a deeming fiction by which income received on behalf of persons with indeterminate shares could be taxed as if it were the income of an association of persons, provided the main part of section 41(1) was attracted. The challenge based on the ordinary meaning of association of persons therefore could not succeed on these facts.

Conclusion: The maintenance income was rightly treated as jointly receivable by persons with indeterminate shares, and the assessments as an association of persons were valid.

Final Conclusion: The reference was answered in favour of the Revenue and the assessments were upheld on the footing that the proviso to section 41 applied to the joint receipt of maintenance.

Ratio Decidendi: Where income is received on behalf of persons whose shares are indeterminate or unknown, the proviso to section 41 of the Indian Income-tax Act, 1922, deems the receipt taxable as the income of an association of persons, even if no true association exists in fact.

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