Succession and continuity under section 25(4) secured tax relief where a family arrangement transferred the contract business to a family partnership.
Relief under section 25(4) was allowed for the family's contract business because the family arrangement of 31 December 1942 transferred that line of business to a partnership of the same family members and the partnership assumed the existing contracts; contracts in another member's name were excluded. Evidence demonstrated uninterrupted operation of the contract business from its 1920 commencement through the 1927 succession and the 1942 succession, and no material showed discontinuity before 1924. The statutory requirements of succession and continuity for section 25(4) were therefore satisfied and relief granted.
Issues: Whether the assessee (the family) was entitled to relief under section 25(4) of the Income-tax Act, 1922 in respect of the contract business on the succession effected by the family arrangement of 31 December 1942.
Analysis: The contract activity was treated as one of the family's lines of business and constituted a business for income-tax purposes. The family arrangement of 31 December 1942 transferred the contract business carried on in the name of A.S.G. Lourdusami Pillai to a partnership composed of the same family members, and the partnership took over the contracts that formed the family's contract business. Contracts that stood in another family member's name were found not to have formed part of the family business covered by the transfer. Evidence showed continuity of the contract business from its commencement in 1920 through the 1927 succession and up to the 1942 succession, and there was no material to support a finding of discontinuity prior to 1924. The requirements of succession and continuity as applied under section 25(4) were therefore satisfied.
Conclusion: The assessee is entitled to relief under section 25(4) of the Income-tax Act, 1922 in respect of the contract business; the question is answered in the affirmative in favour of the assessee.
TaxTMI 
• Category-wise results to explore all relevant documents on TaxTMI
Help Us Improve - by giving the rating with each AI Result:
TaxTMI 
TaxTMI 
