IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH: JODHPUR

BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER.

MA Nos.34 to 38/JU/2014

A/o ITA Nos. 54 to 58/JU/2012 (A.Y. 2003-04 to 2006-07 & 2008-09)

M/s Nosegay Kinder Garden Vs. The Income-tax Officer Chak – 7 – E, Chhoti Ward – 2 Sriganganagar Sriganganagar PAN No. AAAJN 0531 H

MA Nos. 39 to 43/JU/2014

A/o C.O. Nos. 9 to 13/JU/2012 (A.Y. 2003-04 to 2006-07 & 2008-09)

Nosegay Public School Vs. Income-tax Officer Chak – 7 – E, Chhoti Ward – 2 Sriganganagar Sriganganagar PAN No. AAATN 5781 D Assessee by : Shri Suresh Ojha Department by : Shri Jai Singh Date of hearing : 26/08/2014 Date of pronouncement: 08/09/2014 PER HARI OM MARATHA, JM :

These miscellaneous applications arising out of Tribunal

order dated 12.02.2013 have been filed by the assessee.

2

2. In the present miscellaneous applications submitted by the

assessee, the ground of rectification of mistake is in respect of the fact

that the ground taken by the assessee has not be disposed off. It was

submitted in the application that the ground taken in the memo was

not disposed off. It was also submitted in the miscellaneous application

that the argument of AR taken in the written submission and in person

were also not considered and adjudicated upon. It was also mentioned

in the application that before the ld. CIT(A) as well as before the

Bench the AR relied upon the judgment of Hon’ble Supreme Court in

respect of status of the assessee. The judgments so referred were also

not adjudicated and considered. Therefore, it was prayed that the

mistakes pointed out are the mistakes covered u/s 254(2) of IT Act,

and, therefore, requested to rectify the mistake apparent from the

record in the appellate order of the Tribunal. In the application, the

grounds which remained indisposed of were reproduced.

3. During the course of hearing the ld. A.R reiterated the contents

of the aforesaid Misc. Application and submitted that since the mistake

is apparent from the record, the order dated 12.2.2013 may be

recalled and rectified. During the course of hearing the ld. A.R of the

assessee relied upon the judgment reported in 249 ITR 323 (Raj.) in

3

case of Ramesh Chander Modi and further on the order of the Bench in

case of Ashok Uppal Sriganganagar Vs. Income-tax Officer Ward 1 in MA

No. 92/JU/2007. The assessee also submitted written submissions

wherein also he relied upon the judgment of Rajasthan High Court

delivered in case of Sh. Ramesh Chander Modi reported in 249 ITR page

323 (Raj) where in it was held that if the ground was not disposed of it

shall be a mistake apparent from the record. Regarding the argument

of ground not considered, the ld. A.R also relied upon the judgment

reported in 199 ITR 771 in the case of CIT Vs. Keshav Fruit Mart

wherein it was held that if the argument of ground is not disposed of,

it shall be a mistake apparent from record. It was also argued that if

the judgment of Supreme Court was not considered, it is also a mistake

apparent from record.

4. The ld. D.R., in his rival submissions, opposed the recalling of the

order and stated that the matter should be restored to the file of A.O.

5. We have considered the submissions of both the parties and find

merit in the submissions of ld. A.R. It appears that in the present case,

inadvertently, the Bench has not considered the argument in respect of

status of the assessee and also could not adjudicate the judgment of

4

Hon’ble Supreme Court referred and relied upon by the ld. AR of the

assessee. The appeal of the assessee was decided by the Bench vide

order dated 12.2.2013. The matter was restored back to the file of the

AO. We have considered the argument and also perused the record.

The mistakes so pointed out by the assessee in the application are

correct. Though, the matter in question was restored to the file of the

AO in the light of the fact that the registration has been granted u/s

12A of the Act by the Bench with effect from 9.11.1985 vide order

dated 19.12.2012 but the ground in respect of the status was not

decided. The issue raised in the ground regarding status of the

assessee is important and effecting the taxability of the assessee. The

written submissions were also submitted by the assessee at the time of

appeal wherein it has been mentioned that the Nose Gay Management

Committee is the parent institute and Nosegay Public School and

Nosegay Kinder Garden are the branches thereof. The assessee

submitted copy of written submission, which is placed at pages 1 to 8

of the paper book. In the submissions, the assessee specifically argued

in respect of status of the assessee. The question was as to whether

the separate assessments should have been completed or consolidated

assessment should have been completed. This issue was raised before

the CIT(A) and the CIT(A) did not accept the contention of the

5

assessee, therefore, the assessee has come in appeal in respect of the

status of the institution before this Bench. The A.O took status of the

appellant as AOP. The assessee challenged that the status taken by the

AO is not correct and should have considered the assessee as

controlled and managed by the parent institute i.e. Nose Gay Public

School Management Committee. Before the CIT(A) the assessee

submitted submission and also relied upon two judgments reported in

88 ITR 432 G. Murugesan & Bros. Vs. CIT and 35 ITR 594 G.

Venkataswamy Naidu & Co. Vs. CIT. The CIT(A) also referred to the

judgments in the appellate order at page No. 5 of the order. While

deciding the issue regarding the status it has not adjudicated in

respect of the judgments of Hon’ble Supreme Court in respect of the

status of the AOP. Before the Bench the same arguments were taken

and again relied upon the same judgments. We reproduce the relevant

portion of the judgment reported in 88 ITR 432, which is as under :

“The expression " association of persons " is not a term of art.

That expression has come up for consideration before this court in

more than one case. In Commissioner of Income-tax v. Indira

Balkrishna, this court, after referring to the various judgments,

observed thus :

" It is enough for our purpose to refer to three decisions : In re B.

N. Elias , Commissioner of Income-tax v. Laxmidas Devidas ; and

6

In re Dwarkanath Harishchandra Pitale. In In re B. N. Elias,

Derbyshire C.J. rightly pointed out that the word ' associate '

means, according to the Oxford Dictionary, ' to join in common

purpose, or to join in an action '. Therefore, an association of

persons must be one in which two or more persons join in a

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.

This was the view expressed by Beaumont C.J. in Commissioner of

Income-tax v. Laxmidas Devidas, at page 589 and also in In re

Dwarkanath Harishchandra Pitale. In In re B. N. Elias, Costello J.

put the test in more forceful language. He said; ' It may well be

that the intention of the legislature was to hit combination of

individuals who were engaged together in some joint enterprise

but did not in law constitute partnerships ...... When we find. . .

. . that there is a combination of persons formed for the

promotion of a joint enterprise. . . . . then I think no difficulty

arises whatever in the way of saying that ...... these persons did

constitute an association.

We think that the aforesaid decisions correctly lay down the

crucial test for determining what is an ' association of persons '

within the meaning of section 3 of the Income-tax Act, and they

have been accepted and followed in a number of later decisions

of different High Courts to all of which it is unnecessary to call

attention. It is, however, necessary to add some words of caution

here. There is no formula of universal application as, to what

facts, how many of them and of what nature, are necessary to

come to a conclusion that there is an association of persons

7

within the meaning of section 3; it must depend on the particular

facts and circumstances of each case as to whether the conclusion

can be drawn or not."

In the course of that judgment, this court also observed :

" With regard to the shares, dividends, and interest on deposits

there was no finding of any act of joint management. Indeed, the

main item consists of the dividends and it is difficult to

understand what act of management the widows performed in

respect thereof which produced or helped to produce income."

For forming an " association of persons ", the members of the

association must join together for the purpose of producing an

income. An " association of persons " can be formed only when

two or more individuals voluntarily combine together for a

certain purpose. Hence volition on the part of the members of

the association is an essential ingredient. It is true that even a

minor can join an " association of persons " if his lawful guardian

gives his consent. 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 shareholders function as an "

association of persons " from the mere fact that they jointly own

one or more shares, and jointly receive the dividends declared.

Those circumstances do not by themselves go to show that they

acted as an " association of persons ".

8

6. Though, there is no definition of AOP given in the Income-tax Act

and whereas the Hon’ble Supreme Court in this judgment has

observed that the association of person can be formed only when two

or more persons voluntarily combined together for certain purposes.

Hence, the volition on the part of the members on the association is

an essential ingredient. As such, there must be characteristics of an

association of persons, which can be summarized as under in view of

the above mentioned judgments:

1. There should be two or more persons.

2. Such persons must join together. There should be meeting of minds unless there is violation there can be no association.

3. The association or volition must be for the purpose of producing an income, profit or gain.

If the facts of the case of the assessee is put on this test then the

order of the learned AO does not stand anywhere for the reason that

Nose Gay Public School and Nosegay Kinder Garden is a part of the

activities of Nosegay Public Management Committee, this fact is also

confirmed in an affidavit submitted by the assessee. Furthermore,

there is no group of the persons who could hold property of school then

there remains no status available in the Income-tax Act. In these

circumstances, the status taken by the Assessing authority of the

9

appellant as AOP is not correct if tested on the characteristic as laid

down by the Hon’ble Supreme Court. The judgment of Hon’ble

Supreme Court is having the character of binding nature as per article

141 of Constitution of India. The D.R. is also not in position to

controvert the case law on which the AR relied upon. Merely, because

PAN was obtained under some wrong advice of tax consultant cannot

be a ground for sustaining the status of the appellant as AOP. We

therefore in view of ratio laid down by the Hon’ble Supreme Court in

the aforesaid referred case, are of the confirmed view that the status

of the assessee cannot be taken as AOP and modified the earlier order

to this extent passed by the ITAT.

7. As far as the other grounds are concerned there is no mistake

apparent from the record because these grounds are covered by the

Tribunal order.

8. In the result, all the MAs stand allowed.

Order pronounced in the open court on 08th September, 2104.

Sd/- Sd/- [N.K. Saini] [Hari Om Maratha] Accountant Member Judicial Member Dated : 8th September, 2014

10

VL/- Copy to:

1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) By Order 5. The DR

Assistant Registrar ITAT, Jodhpur