1985 (9) TMI 3 - SC - Income Tax

Hindu Undivided Family entitled to relief under Income-tax Act for 1949-50 assessment year

Badri Prasad Jagan Prasad Versus Commissioner of Income-Tax, Uttar Pradesh

The Supreme Court held that the Hindu undivided family (HUF) was entitled to relief under section 25(4) of the Indian Income-tax Act for the assessment ... Partial Partition In HUF - partial partition of the business was affected on the last day of the previous year 1949-50 and a partnership was formed with effect from the next day - Tribunal was not justified in holding that the assessee was not entitled to the relief under section 25(4) in in the year 1949-50 Issues Involved:1. Entitlement to relief under section 25(4) of the Indian Income-tax Act, 1972 for the assessment year 1949-50.2. Determination of the date of succession for the purpose of section 25(4) benefits.Issue-wise Detailed Analysis:1. Entitlement to Relief Under Section 25(4) for the Assessment Year 1949-50:The primary issue was whether the assessee, a Hindu undivided family (HUF), was entitled to relief under section 25(4) of the Indian Income-tax Act, 1972 for the assessment year 1949-50. The assessee contended that there was a partial partition of the family on October 11, 1948, and that a partnership firm succeeded the family business on October 12, 1948. The Income-tax Officer initially rejected the application for relief. However, the Appellate Assistant Commissioner called for a remand report, which confirmed the succession date as October 12, 1948, but held that the relief could only be claimed in the assessment year 1950-51. The Tribunal and the High Court upheld this view, stating that the benefit under section 25(4) was applicable for the assessment year 1950-51, not 1949-50.The Supreme Court, however, held that the succession took place on October 11, 1948, based on the entries in the account books and the partnership deed, which indicated an intention to carry on the business jointly from the date of the division of assets. The Court emphasized a pragmatic approach, noting that the disruption and succession were intended to be simultaneous. Therefore, the assessee was entitled to relief under section 25(4) for the assessment year 1949-50.2. Determination of the Date of Succession:The second issue was whether the Tribunal was right in holding that the succession took place on October 12, 1948, and consequently, the benefit of section 25(4) could only be availed of in the assessment year 1950-51. The Tribunal and the High Court had determined that the date of succession was October 12, 1948, marking the commencement of the previous year relating to the assessment year 1950-51.The Supreme Court analyzed various judicial precedents, including the decisions of the Bombay High Court in Ambaram Kalidas v. CIT [1951] 19 ITR 227 and the Allahabad High Court in In re Dalsukh Rai Jaidayal [1962] 44 ITR 417. The Court concluded that the date of succession is a mixed question of law and fact, especially in light of the relevant documents and the entries in the account books. The partnership deed recited that the business of the family had been divided among the members on October 11, 1948, and the partnership was to carry on the business from October 12, 1948. The Supreme Court held that the succession took place on October 11, 1948, as there was no vacuum intended between the disruption of the HUF and the commencement of the partnership business.Conclusion:The Supreme Court concluded that the assessee was entitled to relief under section 25(4) for the assessment year 1949-50. The questions were answered in favor of the assessee, and the appeal was allowed with costs. The Court emphasized a pragmatic approach, focusing on the intention and continuity of business operations rather than getting enmeshed in technicalities.