Per Shri T.N.C. Rangarajan, Judicial Member - These appeals am directed against the assessment of capital gains in the hands of two individuals on the ground that it was assessable in the hands of an AOP formed by them.

2. The admitted facts are as follows : One Shri Gururajachar died on 9-2-1969 leaving behind him his two wives, Smt. Bhoomiamma and Smt. Sunandamma, the assessees before us. He died intestate and one of the assets of his estate was the premises in which hotel business was carried on in the name of Neo Mysom Cafe. After his death the two assessees let out the business under a lease deed reserving as consideration on an mount for the premises and a separate amount for the use of the other equipment. The income derived was thus assessed partly as income from property and partly as income from other sources in their individual hands. However, on 3-9-1973 a fresh lease deed was executed with effect from 1-9-1973 under which the entire business was given on lease as a going concern reserving a monthly rent of Rs. 8,000. The assessees contended that this income was derived as an AOP. For the assessment years 1974-75 and 1975-76 that contention was accepted by the order of the AAC dated 17-8-1978 which was also affirmed by the Tribunal in the assessment of the AOP. However, it appears that the assessments of the individuals were restored to the ITO for making fresh assessments and they are still pending. In the previous year ended 31-3-1976 corresponding to the assess-ment year 1976-77 the business was itself sold way under a deed dated 30-10-1975. Returns were filed in the status of an AOP as well as for individual income of the two assessees. It appears that no assessment was made in the status of an AOP but the capital gains arising from the transaction was assessed in the assessments made in the status of indivi-duals according to the share of proceeds. The assessees appealed against these assessments as well as the computation of capital gains but it was largely confirmed by the Commissioner (Appeals). The assessees have appealed further to contend that the capital gains also must be assessed only in the hands of an AOP, consequently, such capital gains cannot be assessed in the hands of the individual assessees, but only a share of the capital gains could be added under section 86(v) of the Act for the purposes of determining the rate of tax applicable and in any event, even if a share of capital could be assessed directly in the hands of the individual assessees only that share of the net amount as computed in the hands of the AOP could be added. On the other hand, the revenue also has appeal ed firstly to contend that the capital gains was rightly computed on the basis of the market value of the property and not the actual consideration received. The revenue contests the appeals of the assessees on the ground that the capital gains arose to the two individuals as tenants in common and not as an AOP and that even if it arose to the AOP, the ITO has option not to assess the AOP but to assess individuals separately and in doing so, he need not compute the income as if it belonged to the AOP.

3. On a consideration of the rival submissions we are of the opinion that the capital gains arose to the AOP and the computation has to be made on that basis even if it were to be assessed in the hands of the two indivi-dual members of the AOP. It is well settled that profits or gains which arise from the sale of an asset would arise or spring from the asset although the operation by which the profits or gains is made to arise out of the asset is the operation of the sale—Sevantilal Maneklal Sheth v. CIT [1968] 68 ITR 503 (SC). Admittedly, after the lease deed of 1973 there was a voluntary association of persons to earn income out of the business asset, and, therefore, the income earned from Neo Mysore Cafe belonged only to the AOP. When that asset which belonged to the AOP was sold, capital gains that arose was income whi