Automatic broken-period tax exemption versus claim-based deeming relief under succession provisions, with only the latter time-barred.

Section 25(4) of the Indian Income-tax Act, 1918 was treated as containing two distinct reliefs. The first, exempting income of the broken period between the end of the previous year and the date of succession, operated automatically and did not require any claim within the one-year limit in Section 25(5). The second, allowing the income of the previous year to be deemed income of the broken period, was expressly claim-based and had to be made within one year from succession; otherwise, it could not be entertained. The text draws a clear distinction between automatic exemption and time-barred deeming relief.

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Issues: (i) Whether the first relief under Section 25(4) of the Indian Income-tax Act, 1918, exempting the income of the broken period between the end of the previous year and the date of succession, required a claim to be made within the limitation period in Section 25(5). (ii) Whether the second relief under Section 25(4), by which the income of the previous year may be deemed to be the income of the broken period, required an within one year under Section 25(5).

Issue (i): Whether the first relief under Section 25(4) of the Indian Income-tax Act, 1918, exempting the income of the broken period between the end of the previous year and the date of succession, required a claim to be made within the limitation period in Section 25(5).

Analysis: The first part of Section 25(4) provides that no tax shall be payable in respect of the income of the period between the end of the previous year and the date of succession. The language was treated as conferring an automatic exemption, distinct from the second part of the sub-section. On that construction, no claim was necessary for the first relief, and the limitation provision in Section 25(5) did not govern it. The relief, however, was referable to the assessment year in which the succession took place.

Conclusion: The first relief was available without any claim and Section 25(5) did not apply to it; the assessee succeeded on this issue.

Issue (ii): Whether the second relief under Section 25(4), by which the income of the previous year may be deemed to be the income of the broken period, required an within one year under Section 25(5).

Analysis: The second part of Section 25(4) was held to be expressly claim-based, because the statute states that the assessee may further claim that the income of the previous year shall be deemed to be the income of the broken period. Section 25(5) bars entertainment of such a claim unless made within one year from the date of succession. As no claim was made within time, the relief could not be granted.

Conclusion: The second relief required a claim within the statutory period and the assessee failed on this issue.

Final Conclusion: The decision drew a distinction between the automatic exemption for the broken period and the separate deeming relief under Section 25(4), and held that only the latter was subject to the one-year limitation in Section 25(5).

Ratio Decidendi: Under Section 25(4) of the Indian Income-tax Act, 1918, the exemption from tax on the broken period operates automatically and is not subject to the limitation in Section 25(5), whereas the further deeming relief must be claimed within the prescribed one-year period.

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