ORDER
Bhaskar Rao, J.
This is a reference made under Section 256(1) of the Income-Tax Act, by the Revenue to decide the following question of law:
'Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from business of running two cinema theaters by M.P. Jayaram (major HUF) and the three heirs of Puttaswamy was not liable to be assessed in the status of AOP:'
2. The facts of the case are, that there was a Joint Hindu Family, of which, one M.R. Puttaswamy was the Kartha. This Joint Family had two cinema theatres - one at Hassan and the other at Arsikera, besides other properties. M.R. Puttaswamy died on 12.7.1968 leaving his two sons as his legal heirs (M.P. Jayaram and M.P. Basavaraj) and an unmarried daughter M.P. Padmavathi. The undivided share of Puttawamy devolved upon his two sons and unmarried daughter, being class I heirs, and his share was 4/13th. The remaining 9/1.3th share continued with the HUF, namely, M.P. Jayaram (major HUF).
3. After the death of Puttaswamy, the Cinema business has continued as before. In the assessment year for 1970-71, the Income-Tax Officer brought the Cinema business income to tax holding that M.P. Jayaram (Major HUF) M.P. Jayaram (Individual) M.P. Basavaraj (Individual) and M.P. Padmavathi (Individual) constituted an association of persons.
4. The Assessee has appealed and the Commissioner of Income-Tax (Appeals) held that there was no Association of persons, but body of individuals. He directed that the status should be taken as body of individuals. The assessee had challenged the order of the Commissioner (Appeals) by filing an Appeal to the Tribunal. The revenue had filed cross-objections contending that the correct status was Association of persons as adopted by the Income-tax Officer. The Appeal and cross-objections were disposed of by the Tribunal by the common order dated 28.2.1991. The Tribunal held that 4/13th share of the Kartha (M.R. Puttaswamy) went out of the family and that the Class-I heirs had inherited the same as tenants-in-common and held that there cannot be any assessment, in the circumstances of this case, against the assessee either in the status of Association of Persons or body of individuals. So, the impugned assessment was, therefore, held to be unsustainable. Therefore, the question of Law as stated supra, is referred to this Court for the openion.
5. The major HUF 9/13th share continued with HUF and the heirs of late M.R. Puttaswamy continuing as a major HUF after the death of M.R. Puttaswamy.
6. The major HUF with 9/13th share and individual with 4/13th share is already assessed to Income-tax of their income.
7. The question is, when once the major HUF Kartha M.P. Jayaram and the individuals i.e., two sons and a daughter i.e., M.P. Jayaram, M.P. Basavaraj and M.P. Padmavathi are already assessed and tax is paid, whether they can be taxed again as associate of persons.
8. After the death of M.R. Puttaswamy, the properties devolved on two sons and daughter by survivorship, that is, by operation of law. The Hindu Undivided Family had filed a Return declaring 9/13th share income from cinema theatre business and accordingly assessment had been made. The three individuals, M.P. Jayaram, M.R Basavaraj and M.P. Padmavathi, had cleared 1/3rd share out of 4/13th share income in their individual returns and accordinglyassessments had been made. After completion of the assessment, the Income-tax Officer issued a Notice under Section 148 of the Income-Tax Act, being of the view that the entire Income-tax from Cinema theaters is assessable in the status of association of persons. The assessee disclosed only the income, but however, the Income-tax officer after considering the same, came to the conclusion that they formed an Association of persons.
9. Therefore, the important question of law that arises for consideration is:
'Where the kartha of major HUF dies, when his undivided share devolves on the heirs by survivorship, and heirs are conducting business as tenants-in-common to the major HUF and their income as individual income to the extent of their share of the deceased kartha whether they form association of persons:'
10. It is relevant to refer the decisions of the Kerala High Court in the case of PARUKUTTY MOOPPILAMMA 149 ITR 131. In that case, certain properties belonged to an HUF and there was partition and the properties were divided among the heirs who were eighteen and some of the properties were left out of the division, but the Deed, however, made it clear that each member of the HUF had 1/18th share. Therefore, after partition, all the members of the family held the assets as tenants-in-common. One of the erstwhile members of the HUF was authorised to manage the properties. Some trees were sold and the profits were assessable to tax. Before the assessing Officer, there was a plea that no assessment could be made in the status of BOI because each member had a defined share, namely, 1/18th and the Income-Tax Officer, made an assessment in the status of BOI and the Tribunal differed with that views. The Kerala High Court held that there was no community of profit and the income accrued directly to the members although for the sake of convenience it was received by one of them and that the erstwhile members of the HUF were assessable directly as individuals.
11. Learned Counsel for the Revenue relied on the decision of the Madras High Court in N.P. SARASWATHI AMMAL AND ORS. v. COMMISSIONER OF INCOME-TAX, MADRAS : [1982]138ITR19(Mad) , in favour of his contention that the property of the individuals to increase the sourceof income form body of individuals, Therefore, it has got a character of association of persons. This Judgment has been considered by this Court in G.N. SUNANDA v. COMMISSIONER OF INCOME-TAX 174 ITR 664 and has distinguished the same that late minors had allowed the integrity of the business to continue which the Court points out was a clear indication of the mother and children keeping in step as a body of individuals. Therefore, the same will not apply.
12. After the death of Puttaswamy, the HUF had a defined share of 9/13th and the shares of late Puttaswamy has devolves on Class-I heirs. In view of that, the heirs are in possession as tenants-in-common, by operation of law. Therefore, there can be no association of persons or body of individuals, as explained by the Judgment of this Court in G.N. Sunanda's Case and the Judgment of Kerala High Court in the case of Parukutty Mooppilamma's case. Therefore, the assessee could not have been assessed in the status of association of persons nor as a body of individuals.
13. The second point to be considered is:
'When once the major HUF and the individuals filed their Returns and they are assessed, whether they can again be shown as Association of Persons:'
The Income-tax Officer had made substantive assessments against the members and the major HUF in respect of their share income. Subsequently he took a step to assess the whole income in the status of AOP and in this view, the Madras High Court in the case of VENKATAKRISHNA RICE COMPANY : [1987]163ITR129(Mad) held:
'Under the scheme of the Income-Tax Act, an association of persons and its members are two distinct entities and the Income-tax Officer has a choice of either assessing the association as a whole on its total Income or alternatively assessing the respective share income of the individual members. Courts have repeatedly held that when once the Income-tax Officer makes an assessment of the share Income of the member of an association, thereafter he could not proceed to assess the income of the association of persons as such and all that would remain to be done in such a case would be for the Income-tax Officer to proceed to deal with the other members' shares of income in their respective assessments. Accordingly, when the Income-tax Officer makes an assessment on the share income of the assessee from a joint venture, he exercises his option of assessment which was valid in law and in accordance with law.'
The High Court of Bombay has taken the same view in the case of V.R. SHETH AND ORS. : [1984]148ITR169(Bom) . In that case the partners or members had been assessed separately on their respective shares in profits and subsequent assessment in the status of firm or AOP was held to be not permissible. Similar is the view taken by Calcutta High Court in the case of RATAN & CO'S : [1981]128ITR39(Cal) and the Patna High Court in the case of MAHENDRA KUMAR AGRAWALL : [1976]103ITR688(Patna) .
14. A converse case, but laying down the same principle, is the decision of the Madhya Pradesh High Court in the case of MR. BANNO E. COWASJI'S CASE : [1984]147ITR744(MP) where, income had been assessed in the hands of AOP and it was held that the same income could not be assessed in the hands of the individual members. The reason is that once the Income-tax Officer has exercised his choice between the association as a whole and the individuals in respect of their income as assessed cannot pass a second assessment in the alternative.
15. Thus the Principle is clear. The income is subject to tax in the hands of the same person only once. If an association or firm is taxed in respect of its income, the same income cannot be charged again in the hands of the members individually or vice-versa. This position is made clear by the Supreme Court and the Income-tax Officer having assessed the respective share Income of the individual members, it was not open for him to proceed against the association as a whole on the total income.
16. In view of the law laid down in the above case, it is clear that, when once the individuals are taxed on the share of income, they cannot be taxed again as association of persons or body of individuals. If they are taxed, it would amount to double tax which is un-constitutional. Therefore, we answer the question against the Revenue and in favour of the Assessee.