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Judgment
Balasubrahmanyan, J.—This case concerns the assessments to Income Tax made on a family group. The group consisted of a widow and
her four sons. they were legatees under a will. the testator was one Perianna Pillai. He was a bus operator. He bequeathed his business to his
widow and four sons. The widow took charges of the operation of bus service during minority of her sons. The present reference, however, relate
to a period of time when three of the sons had already attained majority. As of this period, the ITO treated the widow, her three adult sons, and
the minor son, as an association of persons (AOP), and charged to tax the income from the transport business in their hands as a single unit of
assessment.
The assessee appealed against the assessments. They contended that as legatees under the will of Perianna Pillai, they were tenants-in-common,
each entitled to an equal and separate share in the transport business bequeathed to them. It was urged that, in consequence, each legatee had to
be assessed separately in respect of his, or her, individual share of income from the business. The AAC rejected this contention, and confirmed the
assessments made in the status of an AOP.
The assessee filed further appeals before the I.T. Appellate Tribunal, reiterating their objection that the ITO was in error in assessing them in the
status of an AOP. This contention was met by the department with a new plea put forward at the hearing of the appeal by the Tribunal. The new
plea was that even if the assessee could not be treated as an AOP, they could yet be regarded as a ""body of individuals"" (BOI) and charged to tax
as such, as a single unit of assessment. The Tribunal entertained this new plea of the department and sustained the assessments already made by
treating the assessee as a ""body of individuals"", and directing the ITO to amend the assessments accordingly.
In the present references, brought before this court at the instance of the assessees two questions are raised. One is whether a new plea put
forward by the department as the respondent in the appeals can be entertained by the Tribunal. The other is whether the plea of the department
can be upheld on the merits.
On the issue as to the Tribunal''s jurisdiction, learned counsel on both sides cited a plethora of cases. We, however, need refer, in some detail,
to only one reported decision as an authoritative exposition on the subject, namely, the Supreme Court''s decision in Hukumchand Mills Ltd. Vs.
Commissioner of Income Tax, Central Bombay and Others, . In that case too, as in the present one, a new plea was sought to be raised by the
department while it figured as a respondent in an assessee''s appeal before the Tribunal. The assessee''s first contention in that case was that the
Tribunal was confined to the subject-matter of the appeal, and they cannot travel outside it and determine questions which had not been mooted at
the earlier stages of the proceedings. The Supreme Court rejected this contention, holding that, short of enhancing an assessment, the Tribunal can
determine any point that is raised in the appeal. The assessee''s next contention before the Supreme Court was that while r. 27 of the Appellate
Tribunal Rules enabled a respondent before the Tribunal to support a decision in his favour on a ground decided against him, that rule did not allow
the department to raise before the Tribunal altogether a new plea at the hearing of an appeal preferred by the assessee. The Supreme Court
rejected this contention as well. They observed that the Appellate Tribunal Rules were not exhaustive, and the full plenitude of the Tribunal''s
jurisdiction can by no means be spelled out from their own Rules. In that view, the Supreme court upheld the decision of the Tribunal based on the
new plea raised for the first time by the department as a respondent in the assessee''s appeal.
We regard this decision of the Supreme court as an authoritative ruling on the scope of the Tribunal''s appellate jurisdiction generally, and, more
particularly, as an enunciation of the power of the Tribunal to entertain a new plea put forward by the respondent to an appeal. The Supreme
Court happened to render their decision while construing s. 33(4) of the Indian I.T. Act, 1922. But the principle of the decision, in the our opinion,
governs the ambit of the Tribunal''s jurisdiction even under the corresponding provisions of s. 251(1) of the present I.T. act, 1961. Both
provisions, in terms, enjoin that the Tribunal, after hearing the parties to the appeal, ""shall pass such orders thereon as it thinks fit"". It was while
construing these words and particularly the expression ""thereon"", that the Supreme court rendered their opinion that the Tribunal was not
powerless to dispose of an appeal on the basis of a new point raised by the respondent to the appeal.
In a recent reported decision of this court in Commissioner of Income Tax Vs. Madras Industrial Investment Corporation Ltd., , the Supreme
Court''s ruling in Hukumchand Mills Ltd. Vs. Commissioner of Income Tax, Central Bombay and Others, , was referred to, and the legal position
was summed up in the following terms (p. 463) :
Thus, the legal position is clear that neither the assessee nor the department is restricted to the plea put forward at any earlier stages, when the
matter travels through the hierarchy of authorities and that it would be open to the Tribunal to consider any fresh plea in the exercise of its
discretion. Even where consequences of the acceptance of the assessee''s plea would involve granting a larger amount as deduction than was
demanded at the stages of assessment, the Tribunal would have jurisdiction to consider such a plea. The Tribunal has, however, discretion not to
admit any fresh plea being put forward when it would involve investigation of facts.
We do not regard the last observation as a fetter on the Tribunal''s jurisdiction to admit a new plea. For, the power to listen to a new contention
and decide the appeal on that basis has been spelled out by the Supreme Court from the terms of the statute. The exercise of that power does not
depend on the presence of any other factor, excepting that the new plea comes from a party to the appeal. Even in a case where fresh facts are
called for to decide the new plea, the Tribunal would have jurisdiction to entertain that plea. How the Tribunal wished to get at the relevant facts in
order to decide the new point may be quite a different thing. The Tribunal may either remand the matter for the purpose, or proceed to investigate
the facts themselves. In this part of the decision making alone, there is scope for the play of the Tribunal''s discretion. As to the very power to
entertain a new plea, that is not to be ruled out, merely because of a consideration thereof would call for further facts to be gone into. In
Hukumchand Mills Ltd. Vs. Commissioner of Income Tax, Central Bombay and Others, , the Supreme Court laid down no fetter on the
Tribunal''s powers. That case, indeed, was a case where the new plea raised by the department before the Tribunal could not be considered
without a further investigation into facts. Nevertheless, the Tribunal entertained the plea, and remitted the case to the ITO for the ascertainment of
the relevant facts. The Supreme Court, in their decision, upheld not only the Department''s new plea, but also the Tribunal''s order of remand
based on the new plea.
Three more examples from the law reports were cited before us on the point by the learned standing counsel for the Department. They were
also cases where courts had upheld the Tribunal''s action in entertaining a new plea which happened to be urged by a respondent to the appeal.
Two of the cases cited are from the Bombay High court. They are Commissioner of Income Tax, Bombay City-I Vs. Gilbert and Barker
Manufacturing Co., U.S.A., and D.M. Neterwalla Vs. Commissioner of Income Tax, Bombay City-I, . In one case the respondent happened to
be the assessee. In the other, the respondent was the department. The power of the Tribunal to dispose of an appeal on a new plea raised by a
respondent was upheld in both these cases. The other decision in from Delhi, reported as Commissioner of Income Tax Vs. Edward Keventer
(Successors) P. Ltd., . The Delhi High Court in their judgment observed that a new plea from a respondent must be entertained by the Tribunal as
a matter of practice on principles of natural justice. The value of these three decisions as precedents, however, is so much the less because none of
them refers to the decision of the Supreme Court in Hukumchand Mills Ltd. Vs. Commissioner of Income Tax, Central Bombay and Others, .
Nevertheless, they disclose a consensus of judicial opinion on the amplitude of the Tribunal''s appellate jurisdiction as including the power to
entertain a new plea even if it is raised by a respondent to an appeal.
In the present case, the Tribunal did not have to go in for fresh facts while entertaining the department''s new plea and deciding it. They did so
by applying the relevant statutory provisions to the facts already on record.
Learned counsel for the assessees submitted that, on the facts found, the Tribunal erred in holding that the assessee constituted a BOI within
the meaning of the Act. Learned counsel submitted that the mere fact that a plurality of individuals happened to be interested as owners in a source
of income cannot make them a BOI chargeable to Income Tax as such. Learned counsel said that apart from the presence of a common interest in
a common source of income, there must also be a common intention and a common endeavour to earn income conjointly from that common
source. Learned counsel submitted that co-heirs being entitled to an intestate''s property as tenants-in-common, or legatees under a will being
interested as definite sharers in a common bequest, cannot be banded together by the I.T. dept. and charged to tax as a BOI. The Supreme court
decision in Commissioner of Income Tax, Bombay Vs. Smt. Indira Balkrishna, was cited in this connection. It was urged that the Supreme Court''s
ruling that co-heirs or co-legatees of a deceased cannot be assessed to Income Tax as an AOP will hold good to rule out their assessment even as
a ""BOI"".
We do not subscribe to this view of what a BOI means under the I.T. Act, 1961. It is true that in s. 3(31)(v) of the Act ""body of individuals"" in
placed cheek by jowl with ""association of persons"" in the classified list of ""persons"". But that is no reason to regard the two terms as
interchangeable or synonymous. We should seldom impute to the Legislature a fancy for mere tautology unless we are driven to that inference by
the context or by other factors. It cannot be denied that ""body of individuals"" is a new classification in the fiscal statute. Right from 1939, if not
from 1922 onwards, the I.T. Act had known and recognised the distinct category of taxpayers going by the name of association of individuals, or
association of persons. Although the expressions were left undefined, courts used to associate this class of persons with certain attributes, chief
amongst which was their being associated in a common endeavour for producing taxable income. This at once excluded from the category those
who found themselves thrown together by the accident of the their birth, by the accident of another''s death, by the accident of testamentary
dispositions, and so on. This was the ruling which the Supreme Court rendered in the year 1960 in Commissioner of Income Tax, Bombay Vs.
Smt. Indira Balkrishna, . In rendering that decision, the Supreme Court were not laying down the principle for the first time. They were merely
following three very early decisions of High courts on the subject. Thus, by the time Parliament came to recodify the I.T. Act, which was in 1961,
the year after the Supreme Court decided Commissioner of Income Tax, Bombay Vs. Smt. Indira Balkrishna, , the idea of an AOP had become
too well settled to need further clarification. If Parliament''s intention in drawing up the relevant provisions in the 1961 Act had been to make no
changes in this class of assessees and to leave them well enough alone, it could have done so by the simple expedient of not adding anything to, or
taking away anything from the familiar phrase ""association of persons"". As it happened, however, Parliament added the new class of ""body of
individuals"", while retaining the old expression ""association of persons"". The significance of this addition to the existing classification ought not to be
lost on a court of construction. Legislative history in one other respect also points to the same conclusion. The expression ""association of persons
was adopted as a right expression when extensive amendments to the statute were made in the year 1939. The much earlier statutory term
association of individuals"" was given up by the Legislature for the reason that ""persons"" was thought wide enough to include artificial juridical
persons. To hold, therefore, that a ""body of individuals"" must be equated to an ""association of persons"" would be to disregard the stage-by-stage
evolution of the statutory classification of the different kinds of taxpayers under s. 3(31) of the Act. The difference between an association and a
body is too pronounced to the slurred over. While an ""association"" might well connote an active element of combining or associating, a ""body
would include even a comparatively inert mass of people or institutions. The only essential attributes of a BOI are that there should be a plurality of
individuals and they must, in the gross, haves a nexus to a source of income. This conception at once excludes the crucial characteristics which we
associate with an AOP, such, for instance, as a common intention and a common activity to produce taxable income. In other words, persons who
do nothing but stand and wait may not be an AOP; but they may yet be a BOI, if they stand together, and wait for something to be shared
between them.
It is not our intention to lay down what we mean by a BOI and lay it down in an authoritative or definitive fashion. Parliament had not
attempted a definition. And, if we may adopt a saying of Lord Reid, judges should not rush in where the Legislature has feared to tread. All we
have attempted here is to mark the distinction between an AOP and a BOI, by reference to certain broad features of each. It is needless to say
that it would be a matter for the I.T. authorities as well as the Tribunal and the courts to consider the facts in each case to find out if any given
group of people are to be regarded as a BOI or not. the individuals concerned may have something or other in common which brings them
together with reference to an income or its source. It may be common intention; it may be a common activity; it may be a common management; it
may be common holding out; or it may a sharing of common spoils. This list is not exhaustive. Nor is it necessary that all these characteristics must
be present in every case. Much might depend on the relations inter se between the individuals concerned, and their relationship in the gross to the
income or to the income yielding asset in question.
To turn to the facts of the present case. Here is a family group of a widow and four sons. They are by no means a motley crowd. Nor are they
an ad hoc or random lot finding themselves together by sheer accident. They are, on the contrary, a family group, knit by family ties. At the
inception, they were united in a common grief. The bequest of the business to all of them in common under the testator''s will only tended to make
their family tie-up into more of an economic group or body than it would otherwise have been. What is more, the object which united them
economically was not just an investment in property but a live business undertaking. Business, as a species of property, differs from other subjects
of ownership in that it is not static, but involves a constant flow of transactions upon transactions every day, subject to risks and vicissitudes unlike
in other kinds of property, and requiring overt acts of management by those who wish to profit by it. There is no evidence on record in this case
that the widow was at any time aided by any of her sons even after they had attained majority, one by one. But they always had the choice of
demanding their share, which if conceded, would have resulted either in the disruption of the business or in its disposal. Nothing of this kind,
however, happened in this group. That the integrity of the business continued with not one of them wishing to take his or her share and depart
seems to us to be itself a clear indication that mother and children who had fallen in line at the death of Perianna Pillai were still keeping in step and
minded to keep in step, as a BOI. One might easily play up the blood relationship between these individuals in order to rule out any voluntary
association between them. But the absence of an agreement or arrangement between them would only make them into something less than an
AOP. The point, however, is whether that would make them into something less than a BOI, assessable as a unit ? The answer is quite clear to our
minds. We are satisfied that the assessees (legatees) in this case have got to be treated as a BOI, in spite of, or, perhaps, because of, the accident
of a family relationship between them, and the accident of a testamentary disposition in their favour particularly since they continued that
relationship even though they had a choice of putting an end to it.
We accordingly proceed to enter our formal answers to the questions of law referred to us by the Tribunal. The question are :
Whether, the Tribunal had jurisdiction and right in law in permitting the respondent to raise before it for the first time a new case in the assessee''s
appeal for the assessment years 1967-68 to 1971-72 that the assessment should be made in the status of ''body of individuals'' and to decide the
appeals on that new ground ?
Whether, the Tribunal was right in law in holding and had material to hold that the assessments should be made in the status of ''body of
individuals'' for the assessment years 1967-68 to 1971-72 ?
For the reasons earlier stated, our answers to both the questions are in the affirmative and against the assessee. The department will be entitled
to their costs. Counsel''s fee Rs. 500, one set.