Judgment

HEGDE, J.:- These are connected appeals by certificate. They are directed against the decision of the High Court of Madras in a Reference under Section 66 (1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act).

2. The question of law referred for ascertaining the opinion of the High Court was:

"Whether on the facts and in the circumstances of the case, the Department was justified in assessing the assessee in the status of an Association of Persons?"

In this case we are concerned with the assessment of the assessees for the assessment years 1957-1958 to 1962-63. In all these years the assessees were assessed as an Association of the persons . The contention of the assessees is that in the years, in question, they should have been assessed as individuals and not as an Association of Persons . Therefore, the only question that calls for decision is as to the status of the assessee during the relevant assessment years.

3. For deciding the question formulated above, it is necessary to divide the assessment years into two groups. For the assessment years 1957-58 and 1958-59 the assessees themselves submitted their return in the status of Association of Persons but for the later years, they submitted their returns as individuals . In their returns for the assessment years 1959-60, they stated that they have divided their interest in the shares and therefore, they should be thereafter assessed as individuals . It is necessary to mention one other circumstance before we proceed to set out the relevant facts. The income in which we are concerned in this case arises under two heads. Part of the income arises from house property and the remaining income arises from dividends from shares. So far as the income from house property is concerned, the High Court has answered the question in favour of the assessee; the Revenue has not appealed against that decision. Hence we need not go into that aspect. All that we have to decide in the present case is whether the dividend income which is the subject-matter of these appeals should be assessed in the hands of the appellants as an Association of Persons or as individuals .

4. Now, we shall refer to the material facts as could be gathered from the case stated by that Tribunal. One Sinnamani Nadar (who will be hereinafter referred to as Nadar ) and his son Ganesan partitioned their family properties on December, 4, 1940. Thereafter, Nadar started a firm of his own on June 27, 1955. Later Nadar executed a settlement deed in favour of his four grandsons, namely, G. Murugesan, G. Kathiresan, G. Raja Shanker and G. Vettrivel. The property covered by the said settlement deed included a house property, which had been let out. Under this settlement deed, the donees are to enjoy during the lifetime the properties gifted and thereafter the same was to devolve on their children. Sometime thereafter Nadar purchased a number of shares in Joint Stock Companies in the name of G. Murugesan & Brothers . For each of such purchase, a debit entry was made in the books of the firm. The share applications addressed to the companies for the transfer of the shares from the prior owners to the name of G. Murugesan and Brothers were signed by Padmavathy Ammal, the mother of donees as their guardian. The donees were minors at the time most of these transactions took place. Murugesan became a major on March 3, 1955. After 1959, Murugesan himself signed all transfer applications both on his behalf as well as on behalf of his brothers. The youngest of the brothers became a major on 15-12-1962. The income from the house property and the dividend income from shares were credited to an account called "G. Murugesan & Brothers" in the books of Nadar s Firm. In those books, there are separate accounts for G. Murugesan, G. Kathiresan, G. Raja Shankar and G. Vetrivel. Private income and expenses of these persons were credited or debited to those individual accounts. At the end of each year th