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Judgment
Rajes Kumar, J.—These are six revisions against the order of the Tribunal dated 27.1.2007 relating to firms M/s. Bala Ji Timber Traders, Bhogaon, Mainpuri, M/s. Ambika Ply-wood & Glass Home, Agra Bye-Pass Road, Mainpuri and M/s. Gaya Prasad Timber Traders, Bye-Pass Road, Mainpuri both under the U.P. Trade Tax Act and under the Central Sales Tax Act arising from the proceeding u/s 21 of the Act. In all the revisions, the following common question has been raised:
Whether on the facts and circumstances of the case the Trade Tax Tribunal was legally justified in deleting the name of the dealer from association of person carrying on the business of for the purposes of evasion of tax wholly ignore the nature of transaction?
It appears that one Sri Mahendra Singh was carrying on the business of purchase and sale of timber in his proprietorship in the names of M/s. Bala Ji Timber Traders, Bhogaon, Mainpuri, M/s. Ambika Ply-wood & Glass Home, Agra Bye-Pass Road, Mainpuri and M/s. Gaya Prasad Timber Traders, Bye-Pass Road, Mainpuri. It appears that one Sri Anil Goyal, son of Sri Jai Narain Goyal, Director of M/s. Ganga Ply-wood Industries Private Limited, has attested the signature of Sri Mahendra Sigh in the opening of his bank account. On this basis the assessing authority in the proceeding u/s 21 of the Act held that the business has been carried on by Sri Mahendra Singh, son of Sri Mangad Singh, with Sri Anil Goyal in association of persons and, accordingly, Sri Anil Goyal has been held liable for payment of tax assessed against Sri Mahendra Singh. The aforesaid firms filed the appeals which have been allowed and the matter has been remanded back to the assessing authority.
Being aggrieved by the order, second appeals have been filed before the Tribunal. The Tribunal held that the business cannot be said to have carried on in the status of association of persons merely on the ground that signature of the proprietor has been attested in the opening of bank account.
Heard learned Standing Counsel.
I do not find any error in the order of the Tribunal. Unless there is a volition on the part of the persons to carry on the business jointly to earn the profit, there cannot be a formation of association of persons. Merely because Sri Anil Goyal has attested the signature of the proprietor in the opening of his bank account, it cannot be inferred that Sri Anil Goyal carried on the business in association of persons. No finding has been recorded by the assessing authority that there was volition on the part of Sri Anil Goyal to carry on the business jointly with Sri Mahendra Singh. In the absence of such finding, the assessment in the status of association of persons cannot be held justified.
The Expression "association of persons" came up for consideration before Hon''ble Supreme Court in the case of G. Murugesan and Brothers Vs. Commissioner of Income Tax , Madras, Apex Court observed as follows:
The expression "association of persons" is not a term of art. That expression has come up for consideration before this Court in more than one case. In Commissioner of Income Tax v. Indira Balkrishna, this Court, after referring to the various judgments, observed thus:
It is enough for our purpose to refer to three decisions. In re B.N. Elias, Commissioner of Income Tax v. Laxmidas Devidas, and In re Dwarkanath Harishchandra Pitale. In re B.N. Elias, Derbysshire C.J. rightly pointed out that the word associate means, according to the Oxford Dictionary, to join in common purpose, or to join in an action. Therefore, an association of persons must be one in which two or more persons join in a common purpose of common action and as the words occur in a Section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains. This was the view expressed by Beaumont, C.J. in Commissioner of Income Tax v. Laxmidas Devidas, at page 589 and also In re Dwarkanath Harishchandra Pitale. In In re B.N. Elias, Costellor, J., put the test in more forceful language. He said, it may well be that the intention of the Legislature was to hit combination of individuals who were engaged together in some joint enterprise but did not in law constitute partnerships.... When we find...that there is combination of persons formed for the promotion of a joint enterprise...then I think no difficulty arises whatever in the way of saying that...these persons did constitute an association....
For forming an "association of persons", the members of the association must join together for the purpose of producing an income. An "association of persons" can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence volition on the part of the members of the association is an essential ingredient. It is true that even a minor can join an "association of persons" if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an "association of persons" from the mere fact that they jointly own one or more shares and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an "association of persons."
Following the aforesaid decision, this Court in the case of Rana And Co. Allahabad v. CST reported in 2004 UPTC 228 held as follows:
Law laid down by Hon''ble Supreme Court in the above case is that for forming "Association of Person" the members of the association must join together for the purpose of producing an income and it can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, volition on the part of members of the association is an essential ingredient.
In the result, all the revisions fail and are accordingly dismissed.