Section 25(4) relief depends on continuity of the same business; discontinuance or split partnerships defeat succession relief.

Section 25(4) relief under the Income-tax Act, 1922 applied only where the business taxed under the 1918 Act continued to be carried on by the same person on 1 April 1939 and was then succeeded by another person, without the change being merely a reconstitution of one partnership. The text explains that the original business was treated as discontinued in 1937, or at latest split into two independent partnerships by the deeds of 30 May 1939, so the business taxed under the 1918 Act was no longer in existence when the later transfer to the company occurred. On that basis, the transfer did not amount to a qualifying succession and relief was unavailable.

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Issues: Whether the assessee firm was entitled to relief under section 25(4) of the Income-tax Act, 1922 on the transfer of its business to a company in 1948.

Analysis: Relief under section 25(4) was available only if the business on which tax had been charged under the Indian Income-tax Act, 1918 continued to be carried on by the same person on 1 April 1939 and was thereafter succeeded by another person, the change not being merely in the constitution of a partnership. The majority held that the original business had been discontinued in 1937, or at the latest split into two independent partnerships by the deeds of 30 May 1939, so the business taxed under the 1918 Act was no longer in existence in 1948. The later transfer to the company was therefore not a qualifying succession to the same business carried on on 1 April 1939, and the intervening changes did not amount merely to a change in the constitution of one continuing partnership for the purposes of section 25(4).

Conclusion: The assessee was not entitled to relief under section 25(4), and the claim failed.

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