Law:

Section:

JUDGMENT Veeraswami, J.-This question turns on the status of the assessee. The reference which comes before us at the instance of the Commissioner of Income-tax under section 66(1) of the Income-tax Act, 1922, relates to the assessment years 1957-58 to 1962-63. The question under reference is : "Whether, on the facts and in the circumstances of the case, the department was justified in assessing the assessee in the status of an 'association of persons' ?" On December 4, 1940, Sinnamani Nadar and his son, Ganesan, effected a partition of the family properties and a firm by name A.M.M. Sinnamani Nadar Firm was started on June 27, 1955. Sinnamani Nadar executed a settlement deed conveying to his four grandsons the life-interest in a house property, 94, V.E. Road, Tuticorin, and the remainder to their children. Sinnamani Nadar also made a gift of a certain number of shares in joint stock companies in the name of G. Murugesan and Brothers. The four grandsons, Murugesan, Kathiresan, Raja Shankar and Vetrivel, attained their age of majority on March 15, 1955, February 3, 1956, September 2, 1961, and December 12, 1962. The further facts relating to the determination of the question of status are these. Till February 15, 1959, the mother represented the four boys in realising rent and dividends from the house property as well as the shares and did incidental acts necessary in respect thereof. The income received under both the heads was credited to the joint account of the four brothers in the grand-father's firm and, at the end of each year, the same was credited in equal moieties to their individual accounts in the firm. After February 15, 1959, the eldest brother, Murugesan, started looking after the realisations of the rent and dividends. On March 15, 1955, the brothers out of the funds available to their credit acquired 250 shares and the dividends were first received to the credit of the joint account. On these facts, the revenue took the view that the four brothers formed an association of persons and should be assessed as such but the Tribunal differed and held that, at the inception, the acquisition of the house property and the shares by the brothers was…

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