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Issues: Whether, on the death of a person carrying on a business, the assessment of income derived from that business was to be made wholly under Section 24-B of the Income-tax Act, 1922, or whether the assessment had to be split, with the business profits assessed under Section 26(2) and the remaining income under Section 24-B.
Analysis: Section 24-B was introduced to meet the defect that had been pointed out where a deceased person's estate could not be taxed as such, but it was not intended to override Section 26(2). Before its amendment in 1939, Section 26(2) provided that where a person carrying on a business was succeeded in that capacity by another person, the assessment had to be made on the successor as if the successor had carried on the business throughout the previous year and had received the whole profits. The provisions were read together so that Section 24-B supplemented Section 26(2) in cases of succession by death, while the business income continued to be assessable on the successor under Section 26(2).
Conclusion: The assessment was not to be wholly made under Section 24-B; the business profits were assessable under Section 26(2), and the question was answered in favour of the assessees.
Ratio Decidendi: Where a person carrying on a business dies and is succeeded in that business, Section 24-B does not displace Section 26(2); the successor is assessable on the business income under Section 26(2) as if the business had been carried on throughout the previous year.
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