Business succession on partner's death limits income-tax exemption; separate recovery notice not required when demand notice was served on assessee.

Succession for section 25(4) of the Indian Income-tax Act was held to occur when ownership of the business passed on the partner's death, not when the assets were later sold, so exemption was available only up to that date. The court rejected reliance on sections 42 and 47 of the Partnership Act, holding that section 47 governs winding up after dissolution and does not continue the old firm. On recovery, service of notice on the assessee satisfied section 29, so the absence of a separate notice to the petitioner did not invalidate the section 46(2) certificate or attachment.

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Issues: (i) Whether the assessee was entitled to exemption under section 25(4) of the Indian Income-tax Act for the profits of the business up to the date of sale of the assets, or only up to the death of one partner. (ii) Whether a certificate issued under section 46(2) of the Indian Income-tax Act was invalid for want of a separate notice of demand to the petitioner in the writ proceedings.

Issue (i): Whether the assessee was entitled to exemption under section 25(4) of the Indian Income-tax Act for the profits of the business up to the date of sale of the assets, or only up to the death of one partner.

Analysis: Section 25(4) applies when a person carrying on a business is succeeded by another person, the relevant test being a change of ownership with continuity of the business in the hands of the successor. Succession may occur on death as well as by transfer, and the decisive question is when ownership of the business passes. The contention that the business continued until the eventual sale, because the surviving partner and the legatee carried on the concern and because of sections 42 and 47 of the Partnership Act, was rejected. The record did not show a contract to the contrary sufficient to prevent dissolution on death, and section 47 was held to deal only with winding up after dissolution, not with continuation of the old firm as such.

Conclusion: The succession occurred on the death of the partner, and the exemption under section 25(4) was available only up to that date. The answer was against the assessee and in favour of the Revenue.

Issue (ii): Whether a certificate issued under section 46(2) of the Indian Income-tax Act was invalid for want of a separate notice of demand to the petitioner in the writ proceedings.

Analysis: Section 29 requires notice of demand to be served on the assessee or other person liable to pay the tax. Since notice had been served on the assessee, the statutory requirement was satisfied. The absence of a separate notice to the petitioner did not invalidate the recovery proceedings.

Conclusion: The certificate and subsequent attachment were held valid, and the writ contention failed.

Final Conclusion: The tax reference was answered in favour of the Revenue, and the writ petition was dismissed, leaving the assessee entitled to relief only for the period ending on the partner's death.

Ratio Decidendi: For the purposes of section 25(4), succession in a business occurs on the date when ownership passes to the successor, and section 47 of the Partnership Act does not deem the old partnership to continue beyond dissolution; service of notice on the assessee satisfies section 29 for recovery proceedings.

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