Succession by survivorship does not trigger tax assessment where no transfer of ownership occurs under the income tax provision.

Section 26(2) of the Indian Income Tax Act, 1922 applies only where a business is succeeded to by another person in the sense of a transfer of ownership, so that the successor carries on as owner. Where a Hindu undivided family business devolves on a surviving member by survivorship, there is no such transfer from one person to another because the survivor was already an owner in part. On that reasoning, devolution by survivorship was held not to amount to succession within the section, and the petitioner was not liable to assessment under section 26(2).

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Issues: Whether the petitioner was liable to be assessed under section 26(2) of the Indian Income Tax Act, 1922, on the footing that the business formerly carried on by the Hindu undivided family had been succeeded to by him.

Analysis: Section 26(2) applies where a person carrying on a business is succeeded in that capacity by another person. The decisive element is succession in the sense of a transfer of ownership, so that the successor carries on the business as owner. Where the business of a Hindu undivided family devolves on one surviving member by survivorship, there is no such transfer of ownership from one person to another, because the surviving member had already been an owner in part. The Court held that this form of devolution does not amount to succession within the meaning of the section.

Conclusion: The petitioner was not liable to be assessed under section 26(2), and the answer was in favour of the assessee.

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