MANU/MH/0251/1993

Equivalent Citation: (1994)116CTR(Bom)442, [1994]206ITR647(Bom), [1993]70TAXMAN585(Bom)

Equivalent Citation : [1994 ]206ITR 647 (Bom )

IN THE HIGH COURT OF BOMBAY

Income-tax Reference No. 124 of 1980

Assessment Year: 1973-1974;1974-1975

Decided On: 22.04.1993

Appellants:Commissioner of Income Tax

Vs.
Respondent: Modu Timblo (Individual)

AND

Modu Timblo (Individual)

Vs.
Respondent: Commissioner of Income Tax

Hon'ble Judges/Coram:
Dr. B.P. Saraf and U.T. Shah, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Dr. V. Balasubramaniam and Soli Dastur, Advs.

Case Referred:
CIT v. Purushotam Gangadhar Bhende, (1977) 106 ITR 932 (Bom)

Case Note:

Direct Taxation - assessment - Section 256 (1), 2 (31) to 5, 22 to 26 and 80C

(2) (g) of Income Tax Act, 1961 - whether income from business, share
income from partnership firms and interest earned on bank accounts to be
assessed in hands body of individuals consisting of assessee and his wife -
income from business and share of income from two partnership firms to be
assessed in hands of body of individuals consisting of husband and wife -
interest earned on bank accounts is not assessable in hands of body of
individuals - it is to be assessed in hands of respective co-owners on whose
investment such interest has been received.

JUDGMENT

Dr. B.P. Saraf, J.

1. This is a consolidated reference under section 256(1) of the Income Tax Act, 1961,
made by the Income Tax Appellate Tribunal, ("the Tribunal") on eight reference
applications, four by the Department and four by the assessee, as they involve
common facts and questions of law and arise out of a consolidated order of the
Tribunal. The questions of law referred by the Tribunal are as follows :

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 "(1) Whether, on the facts and in the circumstances of the case, the
Appellate Tribunal is right in holding that the income from business, share
income from partnership firms and interest earned on bank accounts have
to be assessed in the hands of the 'body of individuals' consisting of Mr. and
Mrs. Modu Timblo ?

(2) Whether, on the facts and in the circumstances of the case, the
Appellate Tribunal is right in holding that the dividend income received by
the communion of interest of husband and wife marred under the
Portuguese Civil Code is liable for assessments in equal shares in the hands
of each of the consorts without taxing it in the hands of the body of
individuals ?

(3) Whether, on the facts and in the circumstances of the case, the
Appellate Tribunal is right in holding that the entire managing director's
remuneration and perquisites have to be assessed in the hands of Mr. Modu
Timblo, individual, and not one-half of the same ?"

2. This reference relates to the assessment years 1973-74 and 1974-75. For these two
years, the assessments were made by the Income Tax Officer on the "body of
individuals" consisting of Mr. Modu Timblo and his wife, Mrs. Sushilabai M. Timblo, and
also on Mr. Modu Timblo as "individual". There were six appeals before the Tribunal for
these two years - two by the Income Tax Officer against the Appellate Assistant
Commissioner's orders in the case of Mr. Modu Timblo, individual, and out of the other
four appeals, two were by Mr. Modu Timblo, individual, in respect of his individual
assessments, and two in respect of the assessments made on the body of individuals
consisting of Mr. Modu Timblo and his wife. These appeals were disposed of by the
Tribunal by a consolidated order. Against the above consolidated order of the Tribunal
in the above appeals, there were four reference applications by the Commissioner, two
each by Modu Timblo, individual, and Modu Timblo, representing the body of
individuals. The reference applications were filed by the Commissioner in respect of the
Tribunal's order in the case of the body of individuals and in the case of Modu Timblo,
individual. On all these applications of the Commissioner as well as the assessee, this
consolidated reference has been made by the Tribunal.

3. In order to appreciate the questions of law referred to us, it is necessary to set out
the relevant facts of the case which have given rise to the two sets of assessments,
one on Modu Timblo, individual, and another on the body of individuals ("B.O. I.")
comprising Modu Timblo and his wife. Mr. Modu Timblo and his wife, Sushilabai M.
Timblo, were Portuguese citizens before the liberation of Goa and were married
according to the custom of the realm. They were governed by the Portuguese Civil
Code enacted in 1867 which was amended in 1930. During the accounting periods
relevant to the assessment years 1973-74 and 1974-75, Mr. and Mrs. Modu Timblo
(hereinafter called the "communion" for the sake of convenience), derived income from
business run under the name and style of Messrs. Margao Maritime as well as income
by way of share in the profits of two partnership firms, viz., Messrs. Auto Universal,
Margao, and Messrs. Nav Gomant Prakashan, Margao, and also derived income from
interest from banks, dividend on shares and income from letting of property to one
Gurudas Timblo. So far as these sources of income were concerned, it was common
ground that the income from these sources were of Mr. and Mrs. Modu Timblo in which
each had an equal share. Apart from income from the above sources, Mr. Modu Timblo
also earned remuneration as well as perquisites from a private limited company as its
managing director.

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4. For the assessment years 1973-74 and 1974-75, the Income Tax Officer made two
assessments for each year. One assessment was made on the communion which was
treated as a "body of individuals" as defined in section 2(31) of the Income Tax Act,
1961. In the assessment on the body of individuals for the assessment years 1973-74
and 1974-75, income from the following sources was included :

(i) Income from business in the name of Messrs. Margao Maritime;

(ii) Share of profit from Messrs. Auto Universal and Messrs. Nav Gomant
Prakashan;

(iii) Interest from banks;

(iv) Dividends on shares;

(v) Rent from Gurudas Timblo; and

(vi) Perquisites from a private limited company.

5. Two assessments were also made on Mr. Modu Timblo as an individual for the above
two years and in these assessments, in addition to remuneration from the private
limited company, the Income Tax Officer included, as a protective measure, income
which was computed in the assessment of the body of individuals as its income.

6. The assessee preferred appeals to the Appellate Assistant Commissioner against

both these sets of assessments. It was contended by the assessee that as the husband
and wife forming the communion have equal vested interest both in the communion
property as well as income arising therefrom, no assessment ought to have been made
on the communion in the status of body of individuals and 50 per cent. of the income
of the communion ought to have been assessed in the hands of Mr. Modu Timblo and
the remaining 50 per cent. in the hands of his wife, Mrs. Sushilabai Timblo, in their
individual status. Apart from this contention, it was also submitted that the
remuneration earned by Mr. Modu Timblo from the private limited company was also
the income of the communion and, therefore, 50 per cent. of that remuneration only
ought to have been included in the assessment of Mr. Modu Timblo.

7. The Appellate Assistant Commissioner did not accept the contention that the
communion could not be assessed in the status of "body of individuals" in respect of
the income from the communion property. With regard to the remuneration from the
private limited company, the Appellate Assistant Commissioner held that the
remuneration was to be assessed fully in the individual assessment of Mr. Modu
Timblo. In the above circumstances, the Appellate Assistant Commissioner dismissed
the appeals filed by the body of the individuals and partly allowed the appeals filed by
Modu Timblo in his status as an individual - the relief being that the income from the
communion properties was excluded from the individual assessments of Modu Timblo.

8. Both the Revenue as well as the assessee, viz., body of individuals consisting of Mr.
Modu Timblo and his wife and Mr. Modu Timblo as individual went in appeal to the
Income Tax Appellate Tribunal ("the Tribunal") against the orders of the Appellate
Assistant Commissioner. All these appeals were disposed of by the Tribunal by its
consolidated order dated March 31, 1977. The main contention on behalf of the
communion before the Tribunal was that there could be no assessment in the status of
body of individuals while the main contention of Mr. Modu Timblo as individual was that

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only 50 per cent. of the remuneration received by him from the limited company ought
to have been assessed in his hands as an individual and the remaining 50 per cent.
should be assessed in the hands of his wife. The Revenue, on the other hand, in its
appeals, contended that the Appellate Assistant Commissioner erred in excluding from
the total income of the individual the income from business and other sources arising
from the communion property.

9. The Tribunal considered the aforesaid rival submissions of the assessee as well as
the Revenue in the light of the decision of this court in CIT v. Purushotam Gangadhar
Bhende MANU/MH/0037/1974 : [1977]106ITR932(Bom) and held that the High Court
in the above case was mainly concerned with the legal position of the communion with
regard to its "income from property" and in that context on a detailed examination of
the various articles of the Portuguese Civil Code, it was held that section 26 of the
Income Tax Act, 1961, applied to the communion in regard to its income from house
property. The Tribunal also noticed that the High Court did not examine the legal
position whether in regard to communion's income falling under heads other than
"income from house property", the status of the communion should be body of
individuals or not. According to the Tribunal, the High Court in the above case had
clearly opined that the communion of the husband and wife was not akin to a Hindu
undivided family under the Mitakshara system of Hindu law nor to a "firm" as defined
in the Indian Partnership Act and that it was akin to a tenancy-in-common or to the
English coparcenary having a unit of title, interest and possession. The Tribunal also
considered the decision of the Supreme Court in CIT v. Indira Balkrishna
MANU/SC/0181/1960 : [1960]39ITR546(SC) , as well as the decision of the Andhra
Pradesh High Court in Deccan Wine and General Stores v. CIT MANU/AP/0165/1971 :
[1977]106ITR111(AP) and of the Gujarat High Court in CIT v. Harivadan Tribhovandas
MANU/GJ/0043/1973 : [1977]106ITR494(Guj) and on an elaborate discussion of the
principles laid down in the above judgments found that in order to bring the
communion of husband and wife within the definition of "body of individuals" under the
Income Tax Act, the following two tests should be satisfied :

(1) There should be a combination of individuals who have a unity of

interest; and

(2) One or more of the members of such a combination must carry on some
activity with the object of earning income or one or more member must
produce or help to produce income for the benefit of all.

10. The Tribunal also observed that from the above decisions it was clear that : (i) a
combination of individuals who merely received income jointly without anything further
as in the case of co-heirs inheriting shares or securities will not be a body of
individuals, and (ii) "body of individuals" and "association of persons" do not conceive
an identical person. In the light of the above observation based on the decision of the
Supreme Court and the various High Courts, the Tribunal held that in order that the
communion of the husband and wife constitute a body of individuals for the purposes
of the Income Tax Act, it would be necessary that the communion of husband and wife
marred under the Portuguese Civil Code satisfies the two essential tests mentioned
above with reference to each head of income enumerated in section 14 in respect of
which it is sought to be assessed in what status. The Tribunal then proceeded to
examine how far these tests were satisfied in respect of the different sources of income
concerned. The Tribunal summed up its findings as follows :

"(A) Salaries : This would be assessed in the hands of the individual earning
the salary;

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 (B) Interest on securities : This will have to be assessed equally, but
separately, in the hands of the husband and the wife;

(C) Income from house property : This has to be assessed separately in

equal shares in the hands of the husband and the wife under section 26 of
the Act as held in Bhende's case MANU/MH/0037/1974 : [1977]106ITR932
(Bom) ;

(D) (i) Income from business : Income from any business carried on by the
communion or on its behalf will be the income of the body of individuals and
will have to be assessed in that status.

(ii) Income from profession : Income from profession will have to be fully
assessed in the hands of the individual who earns the professional income
as in the case of salary. It noted, however, that there might be exceptions
when there is a combined effort in the nature of business or profession.

(E) Capital gains : The assessability of capital gains in the hands of the body
of individuals or the individuals constituting the communion will depend
upon the facts of each case;

(F) Income from other sources : Different types of income under this head
may have to be assessed differently on the facts of each case."

11. In the light of the above conclusions, the Tribunal held that in the case of
communion of the husband and wife under the Portuguese Civil Code, by and large
income from business and some of the sources such as hiring of machinery, plant, etc.,
falling under the head "Income from other sources" would be that of the body of
individuals, income falling under the other heads, "Interest on securities", "Profits and
gains of profession", "Capital gains" and from other sources such as "Dividends",
"Interest on deposits", etc., will be joint income of the two spouses and will have to be
assessed in their hands in equal shares. The Tribunal did not agree with the contention
raised on behalf of the assessee that even if the income was treated as accruing or
arising to the communion as "a body of individuals", in view of the rights of the
husband and wife to the property and income there will be a diversion of income by
overriding title. In that view of the matter, the Tribunal held that income from business
in the name of Messrs. Marmugao Maritime and the income from the two partnership
firms, namely, Messrs. Auto Universal and Messrs. Nav Gomant Prakashan, should be
assessed in the status of "body of individuals". Similarly, interest from banks on
current accounts and saving bank accounts maintained in the course of the business
carried on by the communion should be assessed as income of the body of individuals.
Income from dividends was, however, held to be assessable equally in the hands of the
two spouses in their individual assessments. With regard to the income from property
let out to Gurudas Timblo, which was derived from letting out of godowns and office
premises, the Tribunal held that it was income from house property and the provisions
of section 26 will apply as held by this court in CIT v. Purushotam Gangadhar Bhende
MANU/MH/0037/1974 : [1977]106ITR932(Bom) . It also held that the remuneration
from the private limited company, viz., Sociedade De Fomento Industrial Private Ltd.,
including the perquisite of Rs. 3,000 earned by Mr. Modu Timblo, should be assessed
fully in the hands of Mr. Modu Timblo, individually.

12. As stated above, both the assessee in his status as an individual as well as body of
individuals and the Revenue applied for reference under section 256(1) of the Act.

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Accordingly, the Tribunal has made this reference.

13. We have heard learned counsel for both the parties at length.

14. The contentions of Shri Dastur, learned counsel for the assessee, can be summed
up as under :

(i) The Portuguese Civil and Commercial Codes do not create a body of
individuals comprising husband and wife, in whose hands any income may
be assessed because the essential requirements to constitute a body of
individuals are absent in the case of a communion of husband and wife.
Reliance was placed in support of this submission on the decisions of this
court in CIT v. Purushotam Gangadhar Bhende MANU/MH/0037/1974 :
[1977]106ITR932(Bom) , CIT v. Y. S. Desale MANU/MH/0120/1982 : [1982]
137ITR117(Bom) , CGT v. Aleixo P. Velho MANU/MH/0066/1982 : [1983]
143ITR372(Bom) and of the Gujarat High Court in CIT v. Harivadan
Tribhovandas MANU/GJ/0043/1973 : [1977]106ITR494(Guj) . The fact that
the management of the property or the business, after the marriage, is in
the hands of one of the parties, i.e., the husband or the wife does not in any
way affect the above position. (ii) This court having held in Purushotam
Gangadhar Bhende's case MANU/MH/0037/1974 : [1977]106ITR932(Bom)
in Aleixo P. Velho's case MANU/MH/0066/1982 : [1983]143ITR372(Bom)
that the ownership of all property existing and future vested in both the
husband and wife in half shares and having directed the assessment of the
income from house property in equal shares in the individual assessments of
husband and wife, there can be no body of individuals of husband and wife.
(iii) Though the decision of this court in CIT v. Purushotam Gangadhar
Bhende MANU/MH/0037/1974 : [1977]106ITR932(Bom) was rendered in a
case where the dispute related to assessment of income from "house
property" which was decided with reference to section 26 of the Act, the
ratio thereof will apply to income falling under all heads (even though
section 26 did not apply thereto). Reliance was placed in support of this
contention on a decision of this court in Addl. CIT v. Valentino F. Pinto,
Mapuca MANU/MH/0065/1983 : [1984]150ITR408(Bom) . (iv) That on a
correct reading of the rights of the husband and wife under the Portuguese
Civil Code and the decisions of this court, even the salary income earned by
any of the members of the communion, i.e., husband or wife, would accrue
or arise in equal shares to each of them inasmuch as salary is also property.
(v) Even assuming that the entire amount of income from any source arises
either to the husband or the wife, by virtue of the Code a half share of such
income will get diverted by overriding title or a charge by operation of law to
the other spouse and, as such, only half of the income can be assessed in
the hands of the husband or wife to whom it accrued.

The submission of Dr. Balasubramaniam and Mr. G. S. Jetly, learned counsel

for the Revenue, on the other hand, is that on a proper reading of the
various provisions of the Portuguese Civil Code which have been set out and
discussed at length in the judgment of this court in CIT v. Purushotam
Gangadhar Bhende MANU/MH/0037/1974 : [1977]106ITR932(Bom) and the
binding decision of this court in that case, it is clear that the issue for
determination before the court was whether in the case of a husband and
wife governed by the Portuguese Civil Code and married according to the
custom of Goa, each of them can be said to own shares in house property
which are "definite and ascertainable" within the meaning of section 26 of

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 the Act. The court, on going through the various clauses of the Portuguese
Civil Code, came to the conclusion that each of them had a definite and
ascertainable share in the communion property as well as in the income and
in that view of the matter held that section 26 applied to the income from
house property derived by the communion. According to learned counsel, in
the above case, the undisputed position was that the communion of
husband and wife marred under the Portuguese law was an association of
persons because as otherwise there was no question of application of
section 26 of the Act nor there was any necessity to go into the elaborate
discussion, which the court had done in that case, to find out whether the
requirements of section 26 were fulfilled or not in the case of communion of
husband and wife. The submission of counsel, in other words, is that the
decision CIT v. Purushotam Gangadhar Bhende MANU/MH/0037/1974 :
[1977]106ITR932(Bom) presupposes that the communion is an association
of persons and it is on that foundation that the court proceeded to examine
the applicability of section 26 of the Act. The further submission of counsel
for the Revenue is that to decide whether a group of persons can be termed
as an "association of persons" or "body of individuals" within the meaning of
section 2(31) of the Act, it is necessary to know the nature of the activity
undertaken by them. It will vary from the case to case. Counsel for the
Revenue also pointed out that it is not proper to equate a body of
individuals with an association of persons because doing so will amount of
defeating the very purpose of specifically incorporating the expression "body
of individuals" in the list of persons who are taxable entities in addition to
"association of persons" which was already in the Indian Income Tax Act,
1922 ("the 1922 Act"). Learned counsel referred to the decision of the
Supreme Court in CIT v. Indira Balkrishna MANU/SC/0181/1960 : [1960]
39ITR546(SC) and submitted that in the said judgment the court had
interpreted the word "association" and had set out some conditions which
should be fulfilled in order to bring a group of person within the meaning of
"association of persons". To meet this situation, in the definition of "person"
in section 2(31) of the 1961 Act, the word "body of individuals" was
specifically included. It was done only to bring in a group of persons within
that category of assessees which would not have otherwise fallen within its
ambit because of the restricted meaning given to the expression
"association of persons".

15. Learned counsel also submitted that the question of diversion of income from the
husband to the wife or vice versa does not arise in this case.

16. As regards the decision of this court in Addl. CIT v. Valentino F. Pinto, Mapuca
MANU/MH/0065/1983 : [1984]150ITR408(Bom) , the submission of learned counsel
for the Revenue is that the said decision has been given per incuriam.

17. We have carefully considered the rival submissions of learned counsel for the
parties. We have also perused the relevant provisions of the Portuguese Civil Code. We
do not propose to deal with the various provisions of the said Code at length because
all those have been elaborately discussed by this court in Purushotam Gangadhar
Bhende's case MANU/MH/0037/1974 : [1977]106ITR932(Bom) and Aleixo P. Velho's
case MANU/MH/0066/1982 : [1983]143ITR372(Bom) . The legal propositions that
emerge from the various provisions of the Portuguese Civil code as well as article 10 of
the Commercial Code have been summed up in Purushotam Gangadhar Bhende's case
MANU/MH/0037/1974 : [1977]106ITR932(Bom) :

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 "(i) During the subsistence of a marriage celebrated as per the custom of
Goa, the ownership and possession of 'the common estate', immovable as
well as movable, vests in both the husband as well as the wife. This is laid
down in express terms in article 1117. Articles 1118 and 1119 as well as
1766 are also consistent with that legal position;

(ii) Proposition No. 1 applies to the corpus as well as the income of all
communion property, immovable as well as movable. The unique paragraph
(proviso) to article 1109 lays down that even the income of property
excluded from the communion is communion property. A fortiori the income
from the communion property itself must be communion property;

(iii) Under articles 1117 and 1189, the husband has only a right of
management, but even that right is not an absolute right so as to amount to
'ownership' of the income, in view of the provisions of articles 1118, 1119,
1191 and 1219. Moreover, under the very articles 1117 and 1189, even the
wife can be in management in certain contingencies, her right being
similarly fettered under the provisions of article 1193;

(iv) In the corpus as well as the income of communion property, immovable

as well as movable, the husband and the wife each have, during the
subsistence of a marriage celebrated as per the custom of Goa, a fixed and
certain half share which can be ascertained on the termination of the
communion by divorce, separation or death (articles 1121 to 1124, 1203,
1204, 1210, 1216, 1220 and 1226). What is most important in this
connection is that it is an admitted position that on the death of one of the
spouses, communion property does not devolve by survivorship, but the half
share of the deceased spouse goes by succession to his or her own heirs or
legatees by virtue of articles 1122 and 1123. There is a consistent reference
to the half share of each of the consorts throughout the different articles
dealing with various situations (vide articles 1112 to 1114 of the Portuguese
Civil Code, and article 10 of the Commercial Code dealing with the incidence
of debts, and Portuguese Civil Code article 1118, dealing with the disposal of
the movable property as well as articles 1120, 1123, 1220, 1463 and
1471)."

18. The above legal propositions have been reiterated by this court in Aleixo P. Velho's
case MANU/MH/0066/1982 : [1983]143ITR372(Bom) .

19. In Purushotam Gangadhar Bhende's case MANU/MH/0037/1974 : [1977]

106ITR932(Bom) , the controversy related to assessment of income from house
property. The assessee, a Portuguese citizen, before the liberation of Goa, governed by
the Portuguese Civil Code was married as per the custom of Goa and under the
relevant provisions of the Portuguese Civil Code, a house property which yielded an
income of Rs. 3,180 in the previous year relevant to the assessment year 1968-69,
became the property of the communion of the husband and wife. The Income Tax
Officer assessed the income from the property as that of a "body of individuals". The
appellate Assistant Commissioner held that in view of the special provision contained in
section 26 of the Act, respective shares of the husband and wife should be taxed in
their individual hands separately and reversed the order of the Income Tax Officer. The
Tribunal confirmed the order of the appellate Assistant Commissioner. The Revenue
came to the High Court by way of reference. It was contended for the Revenue that so
long as the communion lasts, the husband and wife have no definite and ascertainable
share in the communion property. It was in this context that this court examined the

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various provisions of the Portuguese Civil Code and article 10 of the Commercial Code
and held that under the above provisions, the husband and wife each have, during the
subsistence of a marriage celebrated as per the custom of Goa, a certain and fixed half
share in the corpus as well as the income of the communion property of the husband
and wife, immovable as well as movable, which can be determined only on the
termination of the communion by divorce, separation or death. In that view of the
matter, it was held that section 26 of the Income Tax Act was attracted and the
respective half shares of the husband and wife in the income from the house property,
which was the property of the communion of the husband and wife married according
to the custom Goa should be assessed separately in the hands of each of them, and
not in the hands of "the body of individuals", i.e., the communion of husband and wife,
for the relevant assessment year. This decision is thus an authority for the following
propositions : (i) the communion of husband and wife married according to the custom
of Goa is a "body of individuals"; (ii) the shares of both the members of this body of
individuals in the corpus and the income of the communion property are definite and
ascertainable; and (iii) that being so, section 26 of the Income Tax Act, 1961, will
apply to the income of such association of persons or body of individuals from house
property which provides that in respect of income from house property which provides
that in respect of income from house property, such persons should not be assessed as
an association of persons but the share of each such person in the income from the
property should be included in his total income.

20. The same is the ratio of the decision of this court in CGT v. Aleixo P. Velho
MANU/MH/0066/1982 : [1983]143ITR372(Bom) . In this case also, a gift of movable
and immovable properties was made by an individual and his wife married under the
Portuguese Civil Code. It was held that when the husband and wife, who had been
assessed as a body of individuals, made the gifts, each of them gifted only his and her
respective half share in the properties and hence no assessment could be made on
them on the footing of their having made the gift as a body of individuals. This decision
given in the context of the Gift-tax Act does not in any way affect the foundation of the
judgment that the communion is a body of individuals.

21. Before we proceed to decide the status of the assessee vis-a-vis the income
assessed under each head of income, it may be expedient to mention the decision of
the Supreme Court in CIT v. Indira Balkrishna MANU/SC/0181/1960 : [1960]39ITR546
(SC) . This was a case under the Indian Income Tax Act, 1922, where there was no
taxable entity like "a body of individuals". It was only "an association of persons".
Interpreting the expression "association of persons" as used in section 3 of the Income
Tax Act, it was held by the Supreme Court that the word "associate" means "to join in
common purpose, or to join in an action". Therefore, "association of persons" means
an association in which two or more persons join in common purpose or 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.
Thus the above decision was based on the meaning of the word "association".

22. The expression "person" has now been defined in section 2(31) of the Income Tax
Act, 1961, which included "an association of persons or a body of individuals, whether
incorporated or not". The Legislature had definitely some purpose in mind while
specifically including a body of individuals in the category of persons along with
"association of persons". It will not be proper to say that "body of individuals" must be
given the same meaning attributed to "association of persons" by the Supreme Court
in Indira Balkrishna's case MANU/SC/0181/1960 : [1960]39ITR546(SC) . Doing so will
render the entire exercise of defining the expression and incorporating specifically
"body of individuals" within the ambit of particular category of persons redundant.

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23. The expression "body of individuals" must be given a definite meaning of its own
"Association of persons" and "body of individuals" convey two different combinations of
persons and it will not be proper to try to apply the principle of ejusdem generis to give
the same restricted meaning to the newly introduced expression "body of individuals"
as had been given by the Supreme Court to "the association of persons" on
interpretation of the word "association". The fact that both the expressions are placed
under a common item, does not justify such restrictive interpretation. The expression
"body of individuals" must receive a wider interpretation than "association of persons".
As observed by Chinnappa Reddy J. (as his Lordship then was) in Deccan Wine and
General Stores v. CIT MANU/AP/0165/1971 : [1977]106ITR111(AP) , the expression
"body of individuals" should receive a wide interpretation, perhaps not wide enough to
include combination of individuals who merely receive income jointly without anything
further as in the case of co-heirs inheriting shares or securities, but certainly wide
enough to include a combination of individuals who have a unity of interest but who
are not actuated by a common design and one or more of whose members produce or
help to produce income for the benefit of all. If we apply these tests to the communion
of husband and wife married under the Portuguese law in respect of income derived
from business or such other activities which is managed by one of the members, it is
difficult to say that such communion will not be a body of individuals, because the
essential requirements of unity of interest and one or more member producing or
helping to produce income for the benefit of both are present. What is submitted by
counsel for the assessee in this case is that marriage was not with the intention of
carrying on business or earning income. In other words, the combination was actuated
by a common design to carry on business or to earn income. That, in our view, is not
necessary in the case of a body of individuals. In the judgment of this court in Aleixo P.
Velho's case MANU/MH/0066/1982 : [1983]143ITR372(Bom) , the decision of the
Supreme Court in CGT v. R. Valsala Amma MANU/SC/0251/1971 : [1971]82ITR828
(SC) , which related to a gift by the two ladies who had received the property which
was the subject-matter of gift as tenants-in-common was referred to. It was observed
by this court that in the case before the Supreme Court, the subject-matter of the gift
was property, i.e., building and not businesses and the considerations which determine
whether a gift is made by a body of individuals are obviously different from the
considerations which determine whether income had accrued or could be deemed to
have accrued to a body of individuals.

24. In view of the foregoing discussion, we are of the clear opinion that the
communion of husband and wife married under the custom of Goa and governed by
the Portuguese Civil Code constitutes "a body of individuals" for the purposes of the
Income Tax Act and it will have to be decided in respect of each head of income
whether the income has accrued or arisen to the body of individuals as such or to its
members individually. For that purpose, we will have to deal with each head of income.
Before doing so we may refer to rival submissions of both the parties based on the
decision of this court in Addl. CIT v. Valentino F. Pinto, Mapuca MANU/MH/0065/1983 :
[1984]150ITR408(Bom) and observations made therein that the ratio of the decision of
this court in Purushotam Gangadhar Bhende's case MANU/MH/0037/1974 : [1977]
106ITR932(Bom) will apply to "all income". We have carefully considered the said
decision. For reasons to be discussed a little later, we are of the opinion that so far as
it relates to income from all sources other that business, these observations are only
causal observations which do not form a binding precedent. So far as the decision
pertains to "business income", it is a decision per incuriam and, as such, it cannot be a
binding precedent.

25. Learned counsel for the assessee referred to the decision of this court in CIT v. Y.
S. Desale MANU/MH/0120/1982 : [1982]137ITR117(Bom) and submitted that this

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court has taken a view that in order to hold a combination of persons a body of
individuals, it must satisfy more or less the same conditions laid down for "an
association of persons" in Indira Balkrishna's case [1960] 39 ITR 564. We have
considered this submission. We do not find that the above judgment is an authority for
such an extreme proposition. This court, in the above case, had made it clear that it is
not possible by its very nature to lay down any exhaustive definitions of "a body of
individuals". It is in that context that it was observed that the "body of individuals"
contemplated by the definition of "person" in section 2(31) must be a body which has
the object of undertaking an income-producing activity. Unless that element is present,
however wide meaning and scope of "a body by individuals" may be, as compared with
the limited concept of "an association of persons", it will be difficult to treat a given
number of persons as "a body of individuals" as contemplated by the definition of
"person" in section 2(31) of the Act. The above observations thus make it clear that "a
body of individuals" is different from "an association of persons" which is limited in its
ambit and scope. If we read the above observations of this court with observations of
Chinnappa Reddy J. in Deccan Wine and General Stores' case MANU/AP/0165/1971 :
[1977]106ITR111(AP) , the position becomes still more clear that even if a "body of
individuals" has some characteristics common with "an association of persons", it
cannot be the same thing as or a mere species of an "association of persons" which is
better described as a "body of individuals". We find it difficult to give too narrow and
restricted an interpretation to the expression "body of individuals". The legal position in
this regard has been very aptly summed up Chinnappa Reddy J. in the following words
(at page 114) :

"Thus, a 'body of individuals' is brought in an placed alongside 'an

association of persons'. The juxtaposition of the two expressions does not
suggest that the expression 'body of individuals' should be interpreted
ejusdem generis with the expression 'association of persons'."

26. Naturally, the interpretation should not be so as to destroy the separate identity of
the expression "body of individuals". The expression must have a distinct meaning of
its own; otherwise Parliament would not have introduced it. It may have some
common characteristics with "an association of persons" but it cannot be the same
thing as an association of persons or, as contended by the learned counsel, a mere
species of "association of persons" which is better described as "a body of individuals".

27. The issue before this court in Addl. CIT v. Valentino F. Pinto
MANU/MH/0065/1983 : [1984]150ITR408(Bom) related to the assessment of income
from business accruing to a communion of husband and wife governed by the
Portuguese Civil Code. The question was whether it was to be assessed in the hands of
the communion or separately in the hands of the husband and wife. This court referred
to its earlier decision in Purushotam Gangadhar Bhende's case MANU/MH/0037/1974 :
[1977]106ITR932(Bom) , and observed that, in the said judgment, although the
income considered and it was income from house property, the provisions of the
Portuguese Civil Code as well as article 1192 of the Commercial Code were considered
and it was observed that the respective half shares of the husband and wife in the
income from the house property, which the property of the communion of the husband
and wife married according to the custom of Goa, should be assessed separately in
equal shares in the hands of each of them, and not in the hands of "the body of
individuals" of the communion of husband and wife. This ratio, it was observed, "would
seem to apply to all types of income and cannot be restricted to house property". In
the light of this observation, the answer to the question before the court in that case
was given in favour of the assessee. We have carefully gone through the above
decision. We have already held that this decision, so far as it pertains to assessability

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of business income accruing to a communion of husband and wife governed by the
Portuguese law, is per incuriam because the court, while applying the ratio of the
earlier decision in Purushotam Gangadhar Bhende's case MANU/MH/0037/1974 :
[1977]106ITR932(Bom) , did not take note of the fact that the decision in that case in
regard to the house property income had been arrived at in view of the specific
provision in regard to computation of income from house property owned by co-owners
contained in section 26 of the Act which clearly provides that where any house
property is owned by two or more persons and their respective shares are definite and
ascertainable, such persons shall not in respect of such property be assessed as an
association of persons, but the share of each such person in the income from the
property as computed in accordance with sections 22 to 25 shall be included in his total
income. This section applies to "income from property" of an association of persons
which includes "a body of individuals" also by virtue of section 2(31) of the Act. It is on
account of this provision that such income is not assessed in the hands of the
association of persons but is assessed in the hands of the co-owners if their shares are
definite and ascertainable. Thus, for the application of that section, the condition
precedent is that the shares of the co-owners are "definite and ascertainable". The
question that arose before this court in Purushotam Gangadhar Bhende's case
MANU/MH/0037/1974 : [1977]106ITR932(Bom) was whether section 26 would apply
to income derived from a communion of husband and wife governed by the Portuguese
law. It, therefore, became necessary for the court to find out whether the share of
each member of the communion was definite and ascertainable. It was for that
purpose that this court went into all the relevant chapters and clauses of the
Portuguese Civil Code which governs the rights of the parties to a marriage performed
under the Portuguese law and on perusal of the same held that section 26 applied to
house property income derived by the communion of husband the wife governed by
the Portuguese law and decided the controversy before it accordingly. The issue in that
case was confined to the rights of the members of the communion of husband and wife
governed by the Portuguese law and the applicability of section 26 to income from
house property derived by such communion. The conclusion arrived at by this court in
that case was the shares of both the husband and wife in communion property were
equal. That ratio can be applied to other sources only if similar provision is available in
the Income Tax Act in regard to the income falling under other heads also. There is no
dispute at the Bar that no identical provision is there in the Act in regard to
computation of income falling under any other head of income. That being so, it is
difficult to say that the ratio of the decision in Purushotam Gangadhar Bhende's case
MANU/MH/0037/1974 : [1977]106ITR932(Bom) can be applied to income from
business. This aspect of the matter, it appears, was not brought to the notice of the
court which is evident from the peculiar situation in which the court was placed while
delivering the above decision which has been set out at the outset in the judgment
itself. When that reference was called out for hearing, it was noticed by the court that
no service had been effected on the assessee by the Revenue at whose instance the
reference had been made. The court expressed its displeasure over the way the
reference had been handled by the Revenue and did not feel inclined to postpone the
hearing any further to enable a specific notice being given to the respondent because
the matter seemed to be covered, though not specifically, but in principle by the
decisions of this court. This is clear from the following observations of the court (at
page 409 of 150 ITR) :

"We find it unnecessary to dispose of the reference on the ground that no

proper service has been effected. We also find it unnecessary to postpone
the hearing any further to enable a specific notice being given to the
assessees. The matter has been kept back on a number of occasions but
nothing has been done by the Central Government advocate. This is also

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 because the questions referred to us seem to be covered, though not
specifically, but in principle, by the decisions of our High Court in CIT v.
Purushotam Gangadhar Bhende MANU/MH/0037/1974 : [1977]106ITR932
(Bom) , which decision was subsequently applied in another case, namely,
CGT v. Aleixo P. Velho MANU/MH/0066/1982 : [1983]143ITR372(Bom) ."

28. However, while concluding, the court used somewhat guarded language when it
observed (at page 410) : "This ratio would seem to apply to all types of income and
cannot be restricted to house property. If that be so, the two questions referred to us
can be answered without further elaborate discussion, either factual or legal." The
circumstances under which the court had to decide this case are evident from the
factual situation set out above. It is evident that the court's attention was not drawn to
the distinction in the matter of treatment of income under the head "House property"
and income under other heads which had been created by the Legislature it self by
virtue of specific provision contained in section 26 of the Act. It was not brought to the
notice of this court that the decision of this court in Purushotam Gangadhar Bhende's
case MANU/MH/0037/1974 : [1977]106ITR932(Bom) had been rendered on application
of section 26 of the Act which applied only to house property income and to no other
income. Under the circumstances, the same ratio cannot apply to income falling under
heads other than "income from house property". The said decision, therefore, is a
decision per incuriam, so far as it pertains to income from business which was the
subject-matter of controversy before it because, evidently, in that case this court acted
in ignorance of the relevant provisions of the Act. The general observations therein are
casual observations so far as they relate to income from other heads because the
treatment of income falling under any other head was not the subject-matter of
consideration before this court in that case. Such broad observations were neither
necessary for the decision of that case not justified on the basis of the discussions
contained therein.

29. It may also be not be out of place to mention here that the fact that a particular
combination of persons has been held to be a body of individuals or association of
persons in respect of a particular activity, does not mean that it will be so in respect of
all activities of income therefrom. The status may vary from activity to activity. This
aspect of the matter has been dealt at length by us an earlier decision in CIT v. Shiv
Sagar Estates (AOP) MANU/MH/0252/1992 : [1993]201ITR953(Bom) , Income Tax
Reference No. 231 of 1977 dated 17/18th December, 1992. It is observed thus (at
page 961) :

"A person or group of persons may work in more than one capacity. The
Income Tax Act clearly recognises dual capacity of a person or a group of
persons. In respect of the property in question, these persons were co-
owners, in the company they were shareholders, in the partnership firm
they were partners. They might also have formed an association of persons
to carry on any other activity. All these can go on simultaneously. The very
same persons may receive income as co-owners, as shareholders, as
partners or as members of an association of persons and their status in
respect of a particular income will not affect their status in respect of other
incomes."

30. We reiterate and reaffirm the above observations.

31. We may next deal with the submission of learned counsel for the assessee in
regard to diversion of income by overriding title in view of the equal share of both the
husband and wife in the property and income of the communion by virtue of the

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provision of the Portuguese Civil Code. On a careful consideration, we find it difficult to
accept the submission that it is a case of diversion of income by overriding title. As
observed by this court in CIT v. Bombay Oilseeds and Oil Exchange Ltd.
MANU/MH/0210/1993 : [1993]202ITR198(Bom) (Income-tax Reference No. 238 of
1978 decided on 19th and 20th January, 1993) (at page 206) :

"It is a well-settled legal proposition that an obligation to apply income

which has accrued or arisen or has been received amounts merely to the
apportionment of the income and not to its diversion. An obligation to use
the income in a particular manner does not remove it from the category of
income even if such obligation is part of the original contract giving rise to
the income. Once income has come to the hands of the assessee, it will be
liable to Income Tax whatever may be its destination or to whatever use it
may be put. There is a clear distinction between an obligation to spend in a
particular manner attaching to an income and an obligation attaching to the
source of an income. The legal effect in the two circumstances is completely
different. In the former, it will be an application of income. In the latter, it is
diversion."

32. As observed by the Supreme Court in CIT v. Imperial Chemical Industries (India)
(P.) Ltd. MANU/SC/0203/1969 : [1969]74ITR17(SC) : "the true test for the application
of the rule of diversion of income by an overriding title is whether the amount sought
to be deducted in truth never reached the assessee as his income".

33. Applying the above test, we are of the clear opinion that the principle of diversion
of income by overriding title has no application in the case of communion of husband
and wife governed by the Portuguese law. In that view of the matter, for the purpose
assessment, it will be necessary to decide in respect of every income whether it has
accrued or arisen to the communion as a body of individuals or to both the husband
and wife separately in proportion to their shares in the property or to any one of them,
as in the case of "salary".

34. Before we proceed to discuss the question of accrual of income with reference to
each head of income, it may be expedient to deal with the last argument of learned
counsel for the assessee based on the provision of section 80C(2)(g) of the Act in
support of his argument that the communion should not be treated as a "body of
individuals". Section 80C(2)(g) provides for deduction of amounts paid to effect or
keep in force a life insurance policy on the life of any of the members or the child of
any of the members in computing the income of an association of persons of body of
individuals consisting, in either case, only of husband and wife governed by the system
of community of property in force in the State of Goa. We have perused the above
provision and considered the submission of learned counsel for the assessee. We fail to
understand how this provision supports the contention of the assessee that the
communion of husband and wife governed by the Portuguese law cannot be treated as
an association of persons or a body of individuals. On the other hand, in our opinion,
this provision clearly visualises an assessee which is an association of persons or a
body of individuals consisting in either case, only of husband and wife governed by the
system of community of property (referred to in this judgment as "communion") in
force in the State of Goa. Section 80C, so far as is relevant, as it stood at the material
time, reads :

"80C. Deduction in respect of life insurance premia, contributions to

provident fund, etc. - (1) In computing the total income of an assessee,
there shall be deducted, in accordance with and subject to the provisions of

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 this section, an amount calculated, with reference to the aggregate of the
sums specified in sub-section (2), at the following rates, namely :- ...

(2) The sums referred to in sub-section (1) shall be the following, namely :-

(a) where the assessment is an individual, any sums paid in the previous
year by the assessee out of his income chargeable to tax - . . .

(b) where the assessee is a Hindu undivided family, any sums paid in the
previous year by the assessee out of its income chargeable to tax, to effect
or to keep in force in insurance on the life of any member of the family; . . .
..

(g) where the assessee is an association of persons or a body of individuals

consisting only of husband and wife governed by the system of community
of property in force in the Union Territories of Dadra and Nagar Haveli and
Goa, Daman and Diu -

(i) any sums paid in the previous year by the assessee out of its income
chargeable to tax -

(1) to effect or to keep in force an insurance on the life of any member of

such association or body or on the life of any child of any of the members of
such association or body; or

(2) to effect or to keep in force a contract for a deferred annuity on the life
of any member of such association or body or any child of any of the
members of such association or body :

Provided that such contract does not contain a provision for the exercise by
the insured of an option to receive a cash payment in lieu of the payment of
the annuity; or

(3) as a contribution to any provident fund referred to in sub-clause (iv) of

clause (a); or

(4) as a contribution for participation by any one member of such

association or body in the Unit-linked Insurance Plan. . . ."

35. From a plain reading of the above provision, it is clear that different provisions
have been made for deduction depending upon the fact whether the assessee is an
individual, a Hindu undivided family or "an association of persons or a body of
individuals consisting, in either case, only of husband and wife governed by the system
of community of property in force in the State of Goa and the Union Territories of
Dadra and Nagar Haveli.

36. It is pertinent to note that the benefit of deduction has not been extended to all
associations of persons or bodies of individuals but has been restricted to associations
or bodies of individuals consisting, in either case, only of husband and wife governed
by the system of community of property in force in the State of Goa, etc. This
provision, in our opinion, instead of supporting the contention of the assessee, lends
full support to the conclusion arrived at by us that the communion of husband and wife
has to be treated as an association of persons or a body of individuals for the purpose

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of assessment of income from the communion property.

37. In the background of the above discussion, we may refer to some of the provisions
of the Act.

38. Section 4 is the charging section. It provides, inter alia, that Income Tax shall be
charged in respect of the total income of the previous year of every person. "Person"
has been defined in section 2(31) to include, inter alia, an individual, a Hindu undivided
family, a firm, "an association of persons or a body of individuals, whether
incorporated or not". Section 5 of the Act defines the scope of total income with
reference to residence in India. In respect of residents who are ordinary residents, it
provides that the total income of such person shall include all income from whatever
source derived which is received or deemed to be received in India or accrues or arises
or is deemed to accrue or arise to him in India or accrues or arises to him outside
India. By section 14, income has been classified, for the purpose of charge of Income
Tax and computation of total income, under the following heads of income :

"A. - Salaries

B. - Interest on securities

C. - Income from house property

D. - Profits and gains of business or profession

E. - Capital gains

F. - Income from other sources."

39. The question for determination is which income in the instant case has accrued or
arisen to the association of persons or body of individuals consisting of husband and
wife governed by the Portuguese law in force in Goa, which has accrued or arisen to
both the husband and wife individually and which has accrued solely to any one of
them.

40. We may take up income from house property first. The income from house
property derived by a communion of husband and wife governed by the Portuguese
Civil Code will not be assessed in the hands of the communion but in view of section 26
of the Act, the share of each such person in the income of the property shall be
assessed in his or her individual hands. This aspect also stands concluded by the
decision of this court in Purushotam Gangadhar Bhende's case MANU/MH/0037/1974 :
[1977]106ITR932(Bom) . We are not concerned in the present case with interest on
securities. We, therefore, need not deal with the same.

41. So far as interest from bank accounts, fixed deposits, etc., is concerned, which
falls under the last head, viz., "Income from other sources", it may be observed that
this is a residuary head and various incomes may fall under it because income of every
kind which is not to be excluded from the total income under the Act shall be
chargeable to Income Tax under this head if it is not chargeable to Income Tax under
any other head specified in section 14. In the instant case, we are called upon to
decide the assessability of income from "interest" and "dividend" which was received
from investment of funds which belonged in equal shares to both the husband and
wife. There was no question of management or effort in deriving the above income. It

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is not a case where the income was derived from money-lending business or in the
course of dealing in shares where different considerations may apply. In the instant
case, we do not find anything to hold that the income from these two sources was
derived by the two co-owners as "a body of individuals". The fact that it was received
by one of them for and on behalf of both is not determinative. This income therefore,
has to be assessed in equal shares separately in the hands of both the husband and
wife in the status of individuals. This conclusion of ours gets full support from the
decision of the Supreme Court in G. Murugesan and Bros. v. CIT
MANU/SC/0227/1973 : [1973]88ITR432(SC) . In this case, the Supreme Court had to
decide about the assessability of income from dividend from shares which stood in the
joint names of a number of persons. The question was whether the dividend income in
such a case could be assessed in the hands of the joint owners in the status of an
association of persons. The Supreme Court held that 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 shareholder functioned as an "association of persons" from
the mere fact that they jointly owned one or more shares, and jointly received the
dividend declared.

42. So far as the "profits and gains of business or profession" are concerned, having
held that the communion constituted a body of individuals which is a separate taxable
entity under section 4 of the Act read with section 2(31) thereof, in the absence of any
special provision to the contrary, we do not find any reason to hold that the income is
not assessable in the hands of the "body of individuals". The income from business
therefore, will be assessable in the hands of the combination as "a body of individuals"
and the same cannot be divided equally among the two members of the communion
for the purpose of assessment in their hands separately. While computing the income,
deduction shall, however, be available in respect of life insurance premium, etc., paid
for effecting insurance on the life of husband or wife or the child by virtue of the
special provision contained in section 80C(2)(g) of the Act.

43. So far as the salary income is concerned, it was contended by learned counsel for
the assessee that this income is also property and, therefore, belongs equally to the
husband and wife no matter who earns the salary. In that view of the matter,
according to learned counsel, the income from salary should be divided equally
between the husband and wife for the purpose of assessment and assessed
accordingly. We have given very careful consideration to the above submission. We,
however, find it difficult to accept the same, because such a conclusion will go counter
to all know principles of law regarding accrual or arising of income from salary. In this
connection, it may be mentioned that salary has been defined in section 15 of the Act.
What is chargeable to tax under the head "Salaries" is :

"(a) any salary due from an employer or a former employer to an assessee

in the previous year, whether paid or not;

(b) any salary paid or allowed to him in the previous year by or on behalf of
an employer or a former employer though not due or before it became due
to him;

(c) any arrears of salary paid or allowed to him in the previous year by or on
behalf of an employer or a former employer, if not charged to Income Tax
for any earlier previous year."

44. For the removal of doubts, in the Explanation, it has been declared that where any

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salary paid in advance is included in the total income of any person for any previous
year, it shall not be included again in the total income of the person when the salary
becomes due.

45. The above definition clearly goes to show that what is assessed under the head
"Salaries" is the salary due to the assessee from an employer or a former employer. In
the instant case, the husband was the employee. It was he who was employed. The
salary accrued to him and it was payable to him by the employer. The employer, while
doing so, was not concerned with the customary laws of his employee. It is impossible
to comprehend that the income from salary can be said to arise to a person who is not
in employment. The customary law or specific law of Goa determines the rights of the
husband and wife in the property and income. It cannot make the wife also an
employee where the husband is employed nor, by reference to such law, can it be said
that half of the salary due to the husband for the services rendered by him will accrue
to the wife. In matters like this, the customary law has no relevance. Situated thus, we
are of the clear opinion, that the income from salary is the income of the person who is
the employee which in the instant case was the husband and that being so, it was
assessable in the manner laid down in section 15 to 17 of the Act, in his hands alone
and no part of it can be assessed in the hands of the wife. The interest of the wife in
the said income by virtue of the customary law may, at the most, amount to
application of income after it has accrued or arisen to the husband who is the
employee. Serious anomalies would arise if we were to agree with the contention of
the assessee that income from salary derived by one person is to be treated as income
derived by two persons, because in that case, the person who is not an employee, who
does not have anything to do with the employer and does not receive anything from
him, will be deemed to be in receipt of salary from the employer and will also be
entitled to standard deduction which is intended to cover expenses incidental to the
earning of such income. It may also be observed that though the standard deduction is
expressed in terms of percentage of the salary, there is a ceiling fixed for such
allowance. If the income is assessed in entitled to claim standard deduction which, in a
given case, may far exceed the ceiling or may go up to double the amount of the
ceiling. We find it extremely difficult to accept such a submission. We, therefore, reject
the same. We hold that the whole of the income from salary is assessable in
employment and to whom it is due from the employer. The same will apply to
remuneration received by a person working as managing director of a company
because such remuneration will be assessed as income from salaries.

46. In the light of the foregoing discussion, we answer the first question as follows :

The Tribunal was right in holding that the income from business and share
of income from the two partnership firms is to be assessed in the hands of
the body of individuals consisting of the husband and wife. The Tribunal,
however, was not correct in holding that interest earned on bank accounts
was also assessable in the hands of the body of individuals. It has to be
assessed in the hands of the respective co-owners on whose investment
such interest has been received.

So far as question No. 2 is concerned, we answer the question in the

affirmative, i.e., in favour of the assessee and against the Revenue.

So far as question No. 3 is concerned it is answered in the affirmative, i.e. in

favour of the Revenue and against the assessee.

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47. Under the facts and circumstances, we make no order as to costs.

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