Succession relief under income-tax law is confined to the broken period before transfer, not the whole accounting year.

Section 25(4) of the Indian Income-tax Act, 1922 limits relief on succession to a business to the broken period between the end of the completed previous year and the date of succession. The court construed "previous year" as the completed accounting year immediately preceding succession and held that exemption cannot extend to the whole accounting period merely because succession occurred soon after its close. As no income arose in the short interval between the end of the previous year and succession, the assessee was not entitled to exemption for the period 19 October 1942 to 7 October 1943.

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Issues: Whether, for the purposes of section 25(4) of the Indian Income-tax Act, 1922, the assessee was entitled to exemption from tax on the entire accounting period from 19 October 1942 to 7 October 1943, or only on the broken period between the end of the previous year and the date of succession.

Analysis: Section 25(4) grants relief only in respect of the income, profits and gains of the period between the end of the previous year and the date of succession. The expression "previous year" was construed, in the context of the provision, as a completed accounting year immediately preceding the succession. On the facts found, the succession took place on 8 October 1943 and the relevant previous year ended on 7 October 1943. The statutory relief therefore attached only to any income, if any, arising in the short interval between the end of that previous year and the date of succession. As no income was earned in that interval, the assessee could not claim exemption for the whole accounting year merely because succession occurred immediately thereafter.

Conclusion: The assessee was not entitled to exemption from tax for the period 19 October 1942 to 7 October 1943 under section 25(4).

Final Conclusion: The reference was answered against the assessee, and the revenue succeeded on the construction of section 25(4) governing relief on succession to a business.

Ratio Decidendi: Under section 25(4) of the Indian Income-tax Act, 1922, relief on succession to a business is confined to the broken period between the end of the completed previous year and the date of succession, and cannot be enlarged to cover the whole accounting year preceding succession.

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