TaxTMI 
TaxTMI 
TaxTMI 
1985 (9) TMI 3
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....fit of section 25(4) could be availed of only in the year 1950-51 ? " There was another question not connected with the first two which was answered in favour of the assessee and is not the subject-matter of this appeal and need not be considered. In the relevant year, the assessee was a Hindu undivided family carrying on business under the name and style M/s. Badri Prasad Jagan Prasad, Agra. It had a branch styled as M/s. Jagan Prasad Shiv Prasad at Achnera. The assessee was assessed under the Indian Income-tax Act, 1918. In the assessment year in question, the assessee contended that there was a partial partition of the family on October 11, 1948, and various businesses owned by the family were divided through entries made in the account books. A partnership firm was constituted to carry on those businesses and succeeded the family on October 12, 1948, according to High Court. The assessee filed an application before the Income-tax Officer claiming the benefit of section 25(4) of the Act. The Income-tax Officer rejected the application. On appeal, the Appellate Assistant Commissioner set aside the order and called for a remand report from the Income-tax Officer. The remand rep....
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....October 12, 1948. If this is question of fact as held by the Tribunal and the High Court and as contended by the Revenue, then relief can only be given in the assessment year 1950-51. But is it a pure question of fact or is it a mixed question of law and fact having regard to the relevant scheme of the Act ? Section 25 of the Act deals with the assessment in the case of a discontinued business. Sub-section (1) of that section provided that where any business, profession or vocation to which subsection (3) was not applicable, was discontinued in any year, an assessment might be made in that year on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance in addition to the assessment, if any, made on the basis of the income, profits or gains of the previous year. Sub-section (2) of section 25 stipulates that any person discontinuing any such business, profession or vocation should give to the Income-tax Officer notice of such discontinuance within fifteen days thereof, and, where any person failed to give the notice required by this sub-section, the Income-tax Officer might direct that a sum shall be recovered ....
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....ection (4) inapplicable in certain cases as these are not applicable to the facts of this case. Sub-sections (5) and (6) are also not relevant for the controversy in this appeal. Three aspects are important. (1) discontinuance, (2) succession and (3) date of succession. All these relate only to business, profession or vocation. Certain aspects of this aspect of law have been considered in decisions of the courts. Some of these may be briefly considered. Before the Bombay High Court in Ambaram Kalidas v. CIT [1951] 19 ITR 227, the assessee, a Hindu undivided family, was a dealer in cloth and was taxed under the provisions of the Indian Income-tax Act, 1918. Its accounting year was Samvat year. The assessee disrupted on Aso Vad 30th, Samvat year 2000 (October 17, 1944) and on Kartak Sud 1st, Samvat year 2001 (October 18, 1944), the joint family business was taken over by a firm consisting of the erstwhile coparceners. In the assessment year 1945-46, the question was raised whether the assessee was entitled to relief under section 25(4) of the Act. It was held, inter alia, (1) that the relief under section 25(4) could not be granted to the assessee in the assessment year 1945-46, bu....
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....uld be entitled to the relief to which a would not be liable to pay any tax in respect of the income, profits and gains of a period which consisted of the end of the previous year and the date of succession. The Bombay High Court was of the view that looking to the plain language of the section, it was clear that this relief had to be claimed by the assessee in the year of assessment in which the said succession took place, and the nature of the relief was that he was not entitled to pay tax on that particular specific period which was made up of the last date of the previous year and the date of succession. The Bombay High Court, therefore, felt that it was necessary to ascertain what was the date of succession, because it was in relation to the date of succession that the relief had to be computed. The period might be anything from one day to 364 days. In the facts of the particular case before the Bombay High Court, the date of succession was October 18, 1944, i.e., assessment year 1946-47. Therefore, the end of the previous year was October 17, 1944, and the date of succession was the very first day of the following assessment year. Therefore, under this section, the relief tha....
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....ection (1) of section 25 of the Act merely empowered the Income-tax Officer, if he so chose to do, to make an accelerated assessment in the case of discontinuance of business at the time of discontinuance to save loss of revenue on the disappearance of an assessee. In other words, the sub-section imposed a liability of premature assessment on the assessee. It conferred no benefit on him. Sub-sections (3) and (4) of section 25 have a different end in view and these are not in pari materia with sub-section (1). These are in the nature of substantive provisions intended to give relief from tax charged in certain cases. The mere circumstance of their being grouped together with subsection (1) in section 25 could not lead to the conclusion that the provisions contained therein were of the same nature and character as the provisions contained in sub-section (1). It was not correct, according to this court, to hold that these two sub-sections were in the nature of exceptions to the rule laid down in subsection (1). Sub-section (1) was itself an exception to the general rule laid down in the charging section of the Act. The object of sub-sections (3) and (4) was to provide relief to a busi....
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....pplying that principle to the facts before the Allahabad High Court, the previous year for the purpose of section 25(4) of the Act would be the period beginning on October 19, 1942, and ending on October 7, 1943, because October 7, 1943, was date preceding the date of succession which, as mentioned above, was " admittedly October 8, 1943 ", a basis upon which the High Court proceeded. It was a case where the findings of fact recorded led to the conclusion that the date of succession was October 8, 1943, and the previous year for purposes of section 25(4) of the Act was the accounting period beginning on October 19, 1942, and ending on October 7, 1943. Under the first part of section 25(4) of the Act, the assessee was entitled as of right to be exempted from tax on the income earned during the period between the end of the previous year and the date of succession. Therefore, the income that would be exempted from tax, according to the Allahabad High Court, under this part of section 25(4) of the Act would be the income earned between October 7, 1943, which was the date on which the previous period ended, and October 8, 1943, which was the date on which the succession took place. Th....
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....943, in that case, for that would leave no period at all between the end of the previous year and the date of succession having regard to the object of the statutory provision, it appeared proper to construe the phrase " end of the previous year", as meaning the end of that previous year which preceded succession and the period in respect of which exemption was claimed. The learned judge noted that the assessee who had paid income-tax under the Act of 1918 and subsequently under the Act of 1922 paid the tax twice in respect of one year's income that of 1921-22. The statute had provided that if that business whose income was thus subjected to double taxation was discontinue or was succeeded to by another person, the person who paid the tax twice on the income of the period 1921-22 should be granted relief in respect of one year's tax. If however, this discontinuance or succession took place not at the end of a year but on any date before the expiry of a full year, the law, according to the learned judge, cast a duty on the. Income-tax Officer not to tax the income of that part of the previous year or accounting period which ended with the date of the discontinuance or succession and....
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.... As the terms of the deed are of some significance, it is necessary to refer to these. The partition deed mainly contained recitals regarding the allocation of immovable property among the various members of the family. So far as business was concerned which is material for the present purpose, there was a deed, preamble of which recited: ........ whereas the joint family after due rendition of accounts disrupted on March 31, 1943, and whereas the immovable property pursuant to a separate partition deed had been divided inter se the constituents of the erstwhile family and whereas the said constituents had taken over their shares and the joint family no longer existed, all the assets had been fully divided, now, therefore, with effect from April 1, 1943 (emphasis supplied), we the parties to this deed start a partnership business in equal shares regarding all business activities " of the business conducted by the HUF. The question was whether the HUF was entitled to the relief upon succession to its business provided by section 25(4) of the Act, of the tax for the entire period April 1, 1942, to March 31, 1943, as claimed by the assessee or whether, as contended by the Revenue, bec....
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.... years, it necessarily followed that it did not arise within this period. Warrington J. had observed at page 380 of the report of the Chancery Division as follows: "Is that argument sound ? It is perfectly true that in many of the well-known text-books relating to the, rule against perpetuity, the rule is stated somewhat in this form, namely, that the estate or the trust or other limitation must arise 'within' the period allowed by law, and I am quite willing to accept that statement as being for all practical purposes a sufficient statement of the rule, but when I come to consider what that statement means and to apply it to such a case as the present, then, in my opinion, the trust which is to arise 'at the expiration' of the term of twenty-one years does arise 'within' the period of twenty-one years, because I should have to resort to all sorts of subtle calculations and distinctions unless 1 were to hold that an estate or a trust to arise coincidentally with the termination of the period of twenty-one years was a valid estate or trust. To put an analogous case which occurred to me in the course of the argument; there must be many cases in which a testator has fixed the period ....
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.... a mixed question of law and fact, especially in view of the documents involved in this case, i.e., entries in the books of account and the deed of partnership. In the instant case before us, the partnership deed dated February 28, 1949, recites as follows: "WHEREAS (1) Jagan Prasad, (2) Har Prasad, (3) Madhura Prasad, (4) Shiva Prasad, (5) Basdeo Prasad, and (6) Dilsuk Rai, first five sons of L. Nak Ram and the sixth son of L. Badri Prasad, all caste Vaish Agarwal resident of Achnera (for Jagan Prasad, Har Prasad, Shiva Prasad and Dil Sukh Rai) and of Agra (for Mathura Prasad and Basdeo Prasad) are carrying on the business at Agra, under the name and style of Agarwal Iron Works and, at Achnera, under the name and style of Jagan Prasad Shiva Prasad, Jagan Prasad Har Prasad as members of the Hindu undivided family known as Badri Prasad Jagan Prasad, but since Deshehra (Kunwar Sudi 10) Samvat 2005 corresponding to October 12, 1948, the business of the family has been divided amongst the six members of the family for which necessary entries are made in the account books and the capital account which is distributed equally among the partners as required by all members signifying the ....