Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1967 Supreme(SC) 202

SUPREME COURT OF INDIA
J.C. SHAH, S.M. SIKRI AND V. RAMASWAMI, JJ.
M. M. Ipoh and others (In all the Appeals), Appellants
Versus
The Commissioner of Income-tax, Madras (In all the Appeals), Respondent.
Civil Appeals Nos. 1060 to 1064 of 1965 and 1103 to 1107 of 1966,
D/- 26-7-1967.
AND
1. Civil Appeals Nos. 1060 to 1064 of 1965.
2. Civil Appeals Nos. 1103 to 1107 of 1966.
Advocates Appeared
Mr. M. K. Nambiyar. Senior Advocate, (M/s. K. Narayanaswami, B. Manivannan and B. Parthasarathy, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Appellants (In all the Appeals); Mr. S. T. Desai, Senior Advocate (M/s. R. Ganapathy Iyer and R N. Sachthey Advocates, with him), for Respondent (In all the Appeals) and for the Attorney General for India (In Civil Appeals Nos. 1103 to 1107 of 1966).

Advocates:
B.MANIVANNAN, B.PARTHASARTHY, J.B.DADACHAN, K.NARAYANASWAMY, M.K.NAMBIYAR, O.C.MATHUR, R.Ganapathy Iyer, R.N.SACH, Ravindra Narayan, S.T.DESAI

The main legal point established in the judgment is that an association of persons was formed by Meyyappa (I), M. S. M. M. firm, and the minor Chettiappa, and the income in the years 1952-53 to 1956-57 accrued to this association. The court also emphasized the role of Meyyappa (I) as the principal officer of 'M. M. Ipoh' and his management of the association's affairs.

Headnote:
Income-tax - Association of persons - S. 3, S. 34, S. 22(2), S. 66(1) - The court discussed the validity of assessments on the association of persons for assessment years 1951-52 to 1956-57. The court held that the income in the years 1952-53 to 1956-57 accrued to an association of persons formed by Meyyappa (I), M. S. M. M. firm, and the minor Chettiappa. The court also held that Meyyappa (I) acted on behalf of Chettiappa in forming the association, and the affairs of this association were under the management of Meyyappa (I) during the relevant years. The court found that there was unity of purpose and objectivity in the association to earn income on behalf of its members. The court also held that the Income-tax Officer was justified in holding Meyyappa (I) to be the principal officer of 'M. M. Ipoh'.
Fact of the Case:

Meyyappa (I), his wife Alagammal, and his two minor sons formed a Hindu undivided family in 1940 and carried on extensive business in money-lending, rubber plantations, and real estates. The property of the family was divided between the three male members in 1940, but Meyyappa (I) continued to manage all the properties and businesses on behalf of himself and his two minor sons. The Income-tax Officer issued notices for the assessment of the income of 'M. M. Ipoh' as an association of persons, which was contested by Meyyappa (I).
Finding of the Court:

The court found that an association of persons was formed by Meyyappa (I), M. S. M. M. firm, and the minor Chettiappa, and the income in the years 1952-53 to 1956-57 accrued to this association. The court also held that Meyyappa (I) acted on behalf of Chettiappa in forming the association, and the affairs of this association were under the management of Meyyappa (I) during the relevant years. The court found unity of purpose and objectivity in the association to earn income on behalf of its members. Additionally, the court held that the Income-tax Officer was justified in holding Meyyappa (I) to be the principal officer of 'M. M. Ipoh'.
Issues: The main issue was the validity of the assessments on the association of persons for assessment years 1951-52 to 1956-57. Additionally, the court addressed the question of whether there were any materials to hold the assessee as the principal officer of 'M. M. Ipoh' assessed in the status of an association of persons.
Ratio Decidendi: The court held that an association of persons was formed by Meyyappa (I), M. S. M. M. firm, and the minor Chettiappa, and the income in the years 1952-53 to 1956-57 accrued to this association. The court also held that Meyyappa (I) acted on behalf of Chettiappa in forming the association, and the affairs of this association were under the management of Meyyappa (I) during the relevant years. The court found unity of purpose and objectivity in the association to earn income on behalf of its members. Additionally, the court held that the Income-tax Officer was justified in holding Meyyappa (I) to be the principal officer of 'M. M. Ipoh'.
Final Decision: The appeals were dismissed, and the court held that the assessments on the association of persons for assessment years 1951-52 to 1956-57 were valid. The court also upheld the decision that Meyyappa (I) was the principal officer of 'M. M. Ipoh'.

Judgement

SHAH, J. : - Meyyappa (I), Alagammal his wife, and Chokalingam and Meyyappa (II) his two minor sons formed in 1940 a Hindu undivided family which traded in the name of "M. S. M. M.". The family carried on extensive business in money-lending, rubber plantations, and in real estates in the Federated States of Malaya, Burma and India.

2. The property of the family was divided between the three male members on February 22, 1940. To Meyyappa (I) were allotted at the partition "business of the family" at Rangoon and at Karaikudi in the Ramnath District and three rubber estates in the Federated States of Malaya and some houses. Even after the partition Meyyappa (I) continued to remain in management on behalf of himself and his two minor sons of all the properties and the businesses carried on by the family when it was joint, and the businesses were carried on in the name of "M. S. M. M."

3. The houses and the three rubber estates allotted exclusively to Meyyappa (I) were entered in the books of accounts opened in the name of "M. M. Ipoh" from the date of the division. In December 1941 Alagammal gave birth to a son who was named Chettiappa. Meyyappa (I) and Chettiappa then constituted a Hindu coparcenary which owned the property and the business as allotted to Meyyappa (I) in the partition of 1940. On December 30, 1949 a deed of partition was executed between Meyyappa (I) and Chockalingam (who had by then attained the age of majority), in respect of the businesses carried on in the name of "M S. M. M." The businesses were thereafter carried on in partnership between Meyyappa (I) representing himself and the minor Chettiappa and Chockalingam Meyyappa (II) was admitted to the benefits of that partnership. On April 13, 1950 partition was effected between Meyyappa (I) and the minor Chettiappa by posting entries in the books of account of M. M. Ipoh. It was agreed that the properties entered in the books of account of M. M. Ipoh shall be held by Meyyappa (I) and Chettiappa in two equal shares, and that the properties shall continue to remain in the management of the-firm M. S. M. M. to the benefit of which Chettiappa was admitted. A deed of partition recording the terms of that partition was executed on May 28, 1953 by Meyyappa (I) and Alagammal acting as guardian of the minor Chettiappa.

4. In 1951 Meyyappa (I) acceded to a demand made by Chockalingam on behalf of the M. S. M. M firm for a half share in the "M. M. Ipoh properties". There was however no division of the properties by metes and bounds, and the management of those properties as a single unit continued to remain with the M. S. M. M. firm as before.

5. Meyyappa (I) was assessed under the Indian Income-tax Act 1922 to tax year after year till the assessment year 1953-54 in respect of the income from the "M. M. Ipoh properties" as a resident individual or as a Karta of a Hindu undivided family. Later the Income-tax Officer, Karaikudi, Ramnath District, issued notices under S. 34 (1) of the Income-tax Act for the assessment years 1951-52 to 1953-54 and under S. 22 (2) for the years 1954-55 to 1956-57 for assessment of the income of "an association of persons styled M. M. Ipoh". The Income-tax Officer rejected the contentions raised by Meyyappa (I) that there was no association of persons of the nature described in the notices and brought to tax the income of the "M. M. Ipoh Properties" as income received by an association of persons formed by Meyyappa (I) and Chettiappa in 1951-52, and by Meyyappa (I), the M. S. M. M. firm and Chettiappa in the years 1952-53 to 1955-57.

6. In appeals filed by M. M. Ipoh, the Appellate Assistant Commissioner confirmed the orders passed by the Income-tax Officer subject to the modification that the income from the houses be assessed under S. 9 (3) of the Income-tax Act in the hands of the members individually, and not as the collective income of the association of persons. The Appellate Tribunal confirmed the order of the Appellate Assistant Com

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