Succession to a business vests on death when executors take over, not when the business is later sold

For section 25(4) of the Income-tax Act, 1922, succession to the business occurred on the testator's death when the estate, including the business, vested in the executors by operation of law. The executors carried on the business as principals under the authority of the will and were liable to assessment on profits earned after death. The phrase "succeeded in such capacity by another person" was read as referring to a change in the person carrying on the business in the taxable capacity, not to a change in beneficial ownership. A temporary direction to continue the business for sale did not postpone succession.

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Issues: Whether, for the purposes of section 25(4) of the Income-tax Act, 1922, succession to a business took place on the death of the testator or only when the executors sold the business as a going concern.

Analysis: The estate, including the business, vested in the executors on the testator's death. They carried on the business as principals under the authority of the will and were liable to assessment on the profits earned after the death. The statutory expression "succeeded in such capacity by another person" was treated as referring to a change in the person carrying on the business in the taxable capacity, not to beneficial ownership. The fact that the executors were directed to continue the business temporarily for purposes of sale did not prevent succession from occurring when the estate vested in them by operation of law.

Conclusion: Succession took place on the death of the testator, and not on the later sale of the business; the contention of the assessee failed.

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