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Issues: Whether, on the disruption of two Hindu undivided families that had been carrying on a business through their respective kartas, the formation of a partnership by the separated members amounted to a change in the persons carrying on the business within the meaning of Section 8(1) of the Excess Profits Tax Act, 1940.
Analysis: For the purposes of the Excess Profits Tax Act, a Hindu undivided family is a distinct person and an assessable unit separate from the individuals composing it. A partnership entered into by the kartas of two families does not, without more, make all the members of those families partners in law. When the families were disrupted and the business was thereafter carried on by the separated members in their individual capacity as a new partnership, the persons carrying on the business were not the same as before. The principle of succession applied equally to this situation, and the Dayabhaga character of the families made no material difference.
Conclusion: There was a change in the persons carrying on the business. The answer to the referred question was in the affirmative, against the assessee and in favour of the Revenue.
Ratio Decidendi: Where a business previously carried on by a partnership represented by Hindu undivided families is, after disruption of those families, continued by the separated members as a new partnership, the identity of the persons carrying on the business changes for the purposes of the Excess Profits Tax Act.
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