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Issues: Whether, on partition of a Hindu undivided family and continuance of the same business by the members as a firm, the assessment of income up to the date of partition was to be made on the firm as successors under Section 26(2) of the Income-tax Act, 1922, or on the members as if no partition had taken place under Section 25-A(2) of the Income-tax Act, 1922.
Analysis: The governing test was whether there had been a succession in the business involving a transfer of ownership. The members of the new firm were the same persons who constituted the Hindu undivided family, and their shares in the business remained the same as before partition. On that footing, there was no change of ownership and no succession in the statutory sense under Section 26(2).
Conclusion: The assessment had to be made in accordance with Section 25-A(2) of the Income-tax Act, 1922, and not on the firm as a successor under Section 26(2).
Final Conclusion: The reference was answered in favour of the Revenue, and the income up to the date of partition was assessable on the members in the manner prescribed for a partitioned Hindu undivided family.
Ratio Decidendi: Succession under the income-tax law requires a transfer of ownership in the business; where the same persons continue the business with the same beneficial interests after partition, Section 25-A(2) applies rather than Section 26(2).
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