Law: Income Tax Act, 1961

Section: 2(31)(v),4

(a) Income-tax----Assessment---Status---Body of individuals---Business carried on by individual---Death of individual---Business continued by widow on her behalf and on behalf of minor children---Profits taxable in status of body of individuals---Indian Income Tax Act, 1961, Ss. 2(31)(v) & 4. An individual who was carrying on business under the name of M and Co. died in-testate, on August 25, 1962, and was survived by his mother, widow and three minor children. The mother of the deceased relinquished her interest in the assets of the deceased against a lump sum payment. The business, M & Co., was continued as single unit in the same name by the widow, on her behalf and on behalf of the three minor children. For the assessment years 1963-64 to 1967-68, the widow claimed that the income from the business should be assessed in equal shares in the hands of the four legal heirs of the deceased. The Income-tax Officer held that the business was one common unit and was assessable in the status of "body ok individuals". The Tribunal, by a majority, confirmed his view. On a reference, the High Court held that the expression "body of individuals"' should receive a wide interpretation to include a combination of individuals who had unity of interest and were actively engaged in the business carried on for the benefit of all of them by one of them and that, therefore, the widow and her children would constitute a "body of individuals", rejecting the contention that as guardian-trustee of the minor children, the mother should have been assessed as a representative assessee in accordance with the provisions of sections 160, 161 and 166 of the Income Tax Act, 1961. On appeal to the Supreme Court: Held, dismissing the appeals, (i) that the profits that arose out of the business were a result of the business activities carried on jointly by the mother on her own behalf and also on behalf of the minor children. It did not make any difference that the widow and the minor sons did not start the business. The business was inherited. It was carried on as before. The fact that the business had been continued by the widow in her own behalf as well as on behalf of the minor…

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