Kerala H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessment is to be made in the case of the applicant-firm in the status of an association of persons as provided under s. 26 of the IT Act ?

Counsel Appeared

P. Radhakrishnan & M.M. Mathew, for the Petitioner : P.K. Ravindranatha Menon & N.R.K. Nari, for the Respondent

K.S. PARIPOORNAN, J.:

The petitioner is an assessee to income-tax. The respondent is the Revenue. We are concerned with the asst. yr. 1977-78. In this original petition, filed under s. 256(2) of the IT Act, the petitioner prays that the Tribunal may be directed to refer certain questions of law formulated in para 4 of the original petition for the decision of this Court. They are as follows:

” (1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessment is to be made in the case of the applicant-firm in the status of an association of persons as provided under s. 26 of the IT Act ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in their finding that the shares of the individual co-owners of the building are not definitely ascertainable ?

(3) Whether, on the facts and in the circumstances of the case, and in the absence of any stipulation regarding the individual rights and ownership of the different members of the applicant-firm in the said building, should not have the Tribunal held that the individual rights of the members in the building is equal ? “

The petitioner-firm was constituted under a deed of partnership dated January 28, 1975. The assessment was completed in the status of an ” association of persons “. The income assessed comprised of income from property. The dispute is with regard to the status. According to the petitioner/assessee, the share income is to be computed in the case of each individual and the assessment should not have been made as an association of persons. The firm was constituted on January 28, 1975. It had three partners and six minors admitted to the benefits of the partnership. The land was purchased in the names of one of the partners and three minors. A building was constructed on this land. The income was returned by the assessee claiming the status as a firm. The registration applied for the year 1976-77 was rejected. The ITO also found that there was no genuine firm in existence. The status assigned was that of an association of persons. The petitioner maintained that the building belonged to the three adults and six minors. It was pleaded that the investment of these persons in the property is ascertainable. So the share of each person in the property and the income therefrom are definite and, therefore, the assessment is not to be made in the status of an association of persons but the share income is to be computed in the case of each person. The case of the Revenue was that there was no specification in any of the documents relied on by the assessee regarding the extent of the right of each person. The materials available only go to show that the property was jointly owned by the partners. It is not possible to ascertain the share of each of the coowners. So, the assignment of the status as an association of persons is justified. The Tribunal, on an evaluation of the relevant facts, held that the only conclusion that can be drawn is that a certain piece of land was purchased in the names of four persons and a building was constructed thereon with common funds without any indication as to the extent of contribution by each party. It was held that the property is co-ownership property where the share of each coowner is not definite or ascertainable. The status assigned as an association of persons is proper. The petition filed by the assessee under s. 256(1) of the IT Act to refer certain questions of law for the decision of this Court was dismissed by order dated May 22, 1984. It was held by the Tribunal that the finding recorded by it is only one of fact and no referable question of law arises out of the order of the Tribunal. Thereafter, the assessee has filed this original petition under s. 256(2) of the IT Act.

We have heard counsel for the petitioner as also counsel for the respondent/Revenue. The Tribunal has found, on the basis of the materials before it, that the land was purchased in the names of 4 persons and the building was constructed thereon with common funds. There was no indication as to the extent of contribution by each party. None of the materials available indicated the extent of the right of each person. In these circumstances, the conclusion is inevitable that the whole property is co-ownership property and the share of each co-owner is not definite or ascertainable. The plea of the assessee that the share income is to be computed in the case of each individual is plainly untenable. The assignment of the status as an association of persons was clearly justified. We are of the view that on the basis of the above findings reached on an appreciation of relevant materials, no referable question of law as formulated in, para 4 of the original petition arises for consideration. We decline to direct the Tribunal to refer the questions formulated in para 4 of the original petition.

This original petition is dismissed.

[Citation : 170 ITR 412]