Income‑tax‑‑‑

‑‑‑Assessment‑‑Body of individuals‑‑‑Death of ‑owner of proprietary concern‑‑‑ Business continued by widow on behalf of heirs of deceased‑‑‑ Business assessable as body of individuals‑‑‑Indian Income Tax Act, 1961, Ss. 143 & 147.

The husband of the assessee, who was a doctor, was the owner of a proprietary concern namely, a clinical laboratory. He died in 1973. The widow of the deceased continued the business on behalf of her minor son and unmarried daughter and two married daughters from the deceased's first wife. For the assessment years 1974‑75, 1975‑76 and 1976‑77, the Income-tax Officer assessed the income from the clinic taking the status as "body of individuals". On appeal, the Tribunal assessed the income of the concern in the hands of each heir of the deceased. On a reference:

Held, that the business was carried on by the widow of the deceased and was in the common interest and object of all the heirs of the deceased. Therefore, the status for assessing the income from the concern as "body of individuals" was proper.

Meera & Co. v. CIT (1979) 120 ITR 564 (P&H) fol.

G:N. Sunanda v. CIT (1988) 174 ITR 66 (Kar.) distinguished.

CIT v. Harivadan Ribhovandas (1977) 106 ITR 494 (Guj.) ref.

JUDGMENT

By this reference application, the Tribunal has referred to the following question for our opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that there is no unity of interest to assess the income from the clinic in the hands of the assessee as body of individuals and that the assessments in the hands of each heir and legal representative should be made separately according to his/her share as per law?"

The assessee, Smt. Renuka Ganguly and others, were carrying on business in the name and style of "National Clinical and Research and Laboratory". It was a proprietary concern of the late Dr. A.N. Ganguly who died on May 26, 1973, intestate leaving behind him the second wife. Sint. Renuka Ganguly, one unmarried daughter and one minor son from the above second wife and two married daughters from the deceased first wife.

A search was made on September 18, 1976, at the above clinic as well as at the residence of the above persons. Some cash and books of account were seized by the Department. On an examination of the seized books, it was revealed that the income has escaped assessment. Therefore, the assessments were reopened under section 147(x) of the Act, and, fresh assessments were completed under sections 143(3)/147(a) of the Act. The Income‑tax Officer has assessed the income taking the statutes as "body of individuals" for the assessment years 1974‑75, 1975‑76 and 1976‑77 following the view taken by the Commissioner of Income‑tax (Appeals) in the case of this assessee for the assessment year 1977‑78.

In appeal before the Commissioner of income‑tax (Appeals), the Commissioner (Appeals) has followed the decision of the Punjab and Haryana High Court in Meera & Co. v. CIT (1979) 120 ITR 564.

In appeal before the Tribunal, the Tribunal has followed the decision of the Karnataka High Court in G.N. Sunanda v. CIT (1988) 174 ITR 664, and directed the Income‑tax Officer, to assess the income from the clinic in the individual hands, that is, in the hands of each heir of Dr. A.N. Ganguly.

None appeared for the assessee.

Learned counsel for the Revenue submits that before the Karnataka High Court, the facts are different. Before the Karnataka High Court, the business was run by the firm and in the case in hand, the business was run by Dr. A.N. Ganguly as. proprietor of National Clinical and Research and Laboratory. Therefore, the issue is squarely covered by the decision of the Punjab and Haryana High Court in the case of Meera & Co. (1979) 120 ITR ,564.

The facts are not in dispute that the concern, National Clinical and Research and Laboratory, was a proprietary concern of the late Dr. A.N. Ganguly, who died on May 26, 1973, leaving behind his daughters and second wife, Smt. Renuka Ganguly. Stet. Renuka Ganguly was running the same clinic on behalf of the minor son and unmarried daughter. It was not a business of a partnership concern.

In. G.N. Sunanda's case (1988) 174 ITR 664, at page 668, the Karnataka High Court has emphasized on the fact that in the case of a business run by a partnership firm, there could be no unity of interest as the partnership interest is certainly divisible and the applicant and her children had defined shares in the same and‑ could receive profits in the same ratio.

In the case of Meera & Co. (1979) 120 ITR 564, the Punjab and Haryana High Court has followed the decision of the Gujarat High Court in the case of CIT v. Harivadan Tribhovandas (1977) 106 ITR 494, wherein it has been held that the word "body of individuals" means the conglomeration of individuals who are carrying on some activity with the object of earning income. The body of individuals must be carrying on an activity with a view to carving income because it is only with such a body of individuals that the Act is concerned.

The Punjab and Haryana High Court further observed that the business which during the lifetime of the deceased was owned by him alone came to be owned by his legal heirs as a group after his death. The share of the minors in the assets including the goodwill was continued to be utilised for producing income. The control of the business was it, the hands of Smt. Krishna Gupta. The business was carried on for the common benefit by one of them representing all of them.

The admitted facts on record are that after the death of Dr. A.N. Ganguly, his second wife, Smt. Renuka Ganguly, is, running the same proprietary concern to earn profit on behalf of die son and minor daughter left behind by Dr. A.N. Ganguly.

Therefore, in our view, the Tribunal has committed an error following the decision of the Karnataka High Court. Whether the business run by a partnership firm or proprietary concern makes a difference. In the case in hand, the business of National Clinical and Research and Laboratory, which was a proprietary concern of Dr. A.N. Ganguly, after his death, was also run by Smt. Renuka Ganguly as a proprietary concern. No partnership firm was constituted.

We find nothing wrong in the order of the Commissioner of Income‑tax (Appeals) and the Income‑tax Officer. The business is run by Smt. Renuka Ganguly to earn income and the business was in the common interest and object of all the heirs of Dr: A.N. Ganguly. The status for assessing the income from the proprietary concern as "body of individuals" is proper. In these facts and circumstances, the income cannot be assessed in the hands of the individuals separately.

It is also pertinent to note that in the assessment year 1977‑78, the status for assessing this income was taken as body of individuals and there was no appeal against the order of the Commissioner of Income‑tax (Appeals). The order of the Commissioner of Income‑tax (Appeals) has been accepted by the Revenue (sic).

In the result, we answer the question in the negative, that is, in favour of the Revenue and against the assessee.

The Reference application, accordingly, stands disposed of.

M.B.A./393/FC

Order accordingly.