Hindu joint family partition does not itself end a business when the same enterprise continues in substance.

Disruption of a Hindu joint family does not automatically discontinue a family business; the question depends on whether the business in substance continued after partition. On the facts described, the father retained the account books, carried on the business under the old name and style, and kept the right to realise outstanding dues, showing continuation of the old business. The sons' separation and receipt of some assets did not by itself establish cessation. The matter was therefore treated as falling under section 26 rather than section 25(3) of the Income-tax Act, 1922, with the reference answered against the assessee.

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Issues: Whether the old business was discontinued on the disruption of the Hindu joint family so as to attract section 25(3) of the Income-tax Act, 1922, or whether the father succeeded to the family business within section 26.

Analysis: The legal effect of the disruption of a Hindu family depends on the facts of each case. Dissolution of the family does not necessarily mean discontinuance of the business, because the business may continue notwithstanding partition. On the facts, the account books remained with the father, he continued the business under the old name and style, and he retained the right to realise the outstanding dues. Those circumstances showed continuation of the old business. The mere fact that the sons separated and took some assets on partition did not establish that the business had ceased.

Conclusion: The business was not discontinued, and the case fell under section 26 rather than section 25(3), in favour of Revenue.

Final Conclusion: The reference was answered against the assessee, with the business held to have continued despite the family partition.

Ratio Decidendi: Disruption of a Hindu joint family does not by itself discontinue a family business; discontinuance must be determined from the facts showing whether the business in substance continued or ended.

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