Judgment 1. In terms of direction given by this Court in ITC Nos. 80 to 82 of 1997, vide order dt. 14th Oct., 1998, the following question of law arising out of common order dt. 14th May, 1996, in ITA Nos. 709 to 711/Asr/1990, passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short the Tribunal) for the asst. yrs. 1983-84, 1984-85 and 1987-88, was referred to this Court for opinion: Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in holding that the Departmental authorities were not justified in framing the assessment for the asst. yrs. 1983-84, 1984-85 and 1987-88 in the name of M/s Sehgal Oil & General Mills as an AOP ? 2. The facts found by the Tribunal as mentioned in the statement of the case are extracted below: 4. The firm M/s Sehgal Oil & General Mills, Jalandhar, was in existence in accordance with partnership deed dt. 28th July, 1961, which was amended subsequently from time to time on the attaining of majority by some of the minor partners, who were children of Sh. D.D. Sehgal, the main partner and it continued upto the asst. yr. 1981-82 as per the last partnership deed, which was executed on 28th Dec., 1968. The main source of income of the assessee-firm was arising from the share held by Sh. D.D. Sehgal, in the firm M/s Leader Engg. Works. Subsequently, the firm M/s Leader Engg. Works was converted into a private limited company, namely M/s Leader Valves (P) Ltd,, and the share held by Sh. D.D, Sehgal was converted into equity capital on which dividends were received along with interest on deposits held in the name of Sh. D.D. Sehgal in M/s Leader Valves (P) Ltd. Sh. D.D. Sehgal, expired on 11th April, 1982, It is the claim of the assessee that no business was done thereafter and the firm stood dissolved by the operation of law on the death of Sh. D.D. Bengal. The AO issued show-cause notice under Section 147(a)/148 for the asst. yrs. 1983-84, 1984-85 and also issued notice under Section 139(2) for the asst. yr. 1987-88, in the name of Sehgal Oil & General Mills, The AO completed assessments and matter was agitated by the assessee before the learned CIT(A). D.D. Bengal. The AO issued show-cause notice under Section 147(a)/148 for the asst. yrs. 1983-84, 1984-85 and also issued notice under Section 139(2) for the asst. yr. 1987-88, in the name of Sehgal Oil & General Mills, The AO completed assessments and matter was agitated by the assessee before the learned CIT(A). The learned CIT(A) uphold the order of the AO and dismissed the appeal filed by the appellant. The matter was adjudicated upon by the Tribunal. The Tribunal, decided the issue in favour of the assessee and gave finding that the Revenue was not justified in framing the assessments for all the three years in the name of Sehgal Oil & General Mills as AOP because no such AOP was in existence. 3. It is further evident from the reply filed by the assessee in response to the show-cause notice issued by the Revenue, that after the death of Sh. D.D. Sehgal there were disputes pending for succession amongst the legal heirs and further that neither dividend nor interest were factually received by the assessee or by any of the co-partners of alleged AOP namely, Sehgal Oil & General Mills. The Tribunal while deciding the case of the assessee in hand, relied upon the judgment of Hon ble the Supreme Court of India in G. Murugesan & Bros. v. CIT 4. Learned Counsel for the Revenue argued that the Department was never informed about the death of Sh. D.D. Sehgal; no notice of dissolution of firm was given. Further that in terms of Section 42 of the Indian Partnership Act, 1932 in case of death of one of the partners, the partnership shall stand dissolved, in the absence of any clause in partnership deed to the contrary. Since the firm stood dissolved by operation of law, the rest of the members of partnership had to be treated as an AOP. He also relied upon a judgment of Hon ble the Supreme Court of India in CIT v. Shelly Products We have gone through this judgment, the counsel could not point out as to how this judgment is even remotely connected with the issue raised in the present case. 5. He also relied upon a judgment of Hon ble the Supreme Court of India in CIT v. Shelly Products We have gone through this judgment, the counsel could not point out as to how this judgment is even remotely connected with the issue raised in the present case. 5. On the other hand, counsel for the assessee argued that the basic ingredients to consider as to whether any entity is an AOP or not, the principles have been laid down in the judgment of Hon ble the Supreme Court of India in CIT v. Indira Balkrishna which was followed in G. Murugesan & Bros, case (supra). Counsel has further stated that these principles still hold the field and have not been disturbed by the apex Court. The relevant part of the judgment in G. Murugesan & Bros, case (supra) is extracted below : For forming an AOP, the members of the association must join together for the purpose of producing an income. An AOP 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 AOP 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 AOP 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 AOP. (Emphasis, italicised in print, supplied). 6. Similar view has been reiterated by Hon ble the Supreme Court of India in Meera & Co. v. CIT which reads as under: 39. We are of the view that the High Court has come to a correct decision. It is not necessary to refer to the large number of cases that have been cited before us but it is well settled by this Court under the Act of 1922, by a series of judgments that AOP must be an association which is formed by volition of the parties for the purpose of generation of income. This is the basic test. 7. This is the basic test. 7. In the case in hand what has been found by the Tribunal is that after the death of Sh. D.D Sehgal, the other partners who were his legal heirs had been fighting for succession. In fact whatever dividend/interest were due to them from M/s Leader Valves (P) Ltd. was not even actually received either by assessee-firm/AOP or the alleged partners of assessee. 8. From the facts found by the Tribunal, it is evident that after the death of Sh. D.D. Sehgal there was no act of volition on the part of the rest of the partners of respondent, to continue with a common purpose to produce income, profit and gains. In the absence thereof, the principles laid down in judgments of Hon ble the Supreme Court of India in Indira Balkrishnas case (supra) and G. Murugesan & Bros, case (supra) are not satisfied and the respondent cannot possibly be termed as an AOP. In view of our above discussion, the question referred to this Court is answered against the Revenue and in favour of the assessee.