TaxTMI 
TaxTMI 
1961 (8) TMI 6
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....6, 1944, February 7, 1944, to January 18, 1945, January 19, 1945, to February 3, 1946, and February 4, 1946, to March 31, 1946. It is in respect of these four accounting periods that the four Civil Appeals Nos. 541 to 544 of 1960 arose from Reference No. 68 of 1953. In Reference No. 58 of 1953 the question referred is one under section 10A of the Excess Profits Tax Act. It has been thus framed : " Whether on the facts and in the circumstances of the case there is any material to justify the finding of the Tribunal that the main purpose in constituting the two firms was the avoidance or reduction of liability to excess profits tax within the meaning of section 10A of the Excess Profits Tax Act ? " The assessment year in regard to this question is 1943-44 and the chargeable accounting period is January 28, 1942, to February 7, 1943. This reference has given rise to Civil Appeal No. 540 of 1960. The two questions thus referred to the High Court have been answered by it in the affirmative against the appellant assessee. The appellant has therefore come to this court by special leave against the decision of the High Court in the two cases referred to it. For the appellant Mr. ....
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....eady taken place. Later on, three of the adult sons of the appellant, Ayyamperumal, Rathinasabapathy and Durairaja commenced separate business under the name and style of V. N. M. A. Ayyamperumal Nadar & Bros. This business was started on January 28, 1942. On the same day the fourth adult son Rajamanickam also commenced a separate business of his own. The appellant likewise started with a fresh set of accounts the business that had been allotted to him and his minor sons. This business commenced on January 28, 1942, and the method adopted in commencing this business was that the business that had been carried on under the two items up to January 27, 1942, had been closed or discontinued. On October 14, 1942, the appellant wrote to the Income-tax Officer about the partition that had been effected in the family, and informed him that after the 15th Thai, Vishu, only the business in the name of V. N. M. Arunachala Nadar at Virudhunagar and Madurai belonged to him. The details of the businesses started by his divided sons were also given by him in this communication. Later, in the usual course the appellant was asked to submit his return for the assessment year 1943-44 as the karta....
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.... the Hindu undivided family continue its existence after 27th January, 1942 for purpose of assessment of income-tax ", said the High Court, " is the real question for determination ". How this family came into existence it was not necessary to enquire or decide. Whether such a family came into existence in point of fact is the only point which called for its decision. Dealing with the question from this point of view the High Court referred to the facts found by the income-tax authorities. It referred to the conduct of the appellant, his application made under section 25A, his declarations to the department, the conduct of the adult sons, the statements made by all the parties in respect of the partition and particularly to the order passed under section 25A. It observed that when the appellant as the head of the new undivided family began his business as a fresh business he expressly stated that the old family business had been closed on January 27, 1942, and a fresh one had been started on January 28, 1942 ; in fact fresh account books were started on that basis. The High Court also observed that unless the requirement of section 25A was satisfied an order could not have been mad....
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....er obtaining their shares from their father. It is true that even in the case of such a partial partition for determining the shares of the seceding coparceners the shares of all the coparceners have to be determined as a preliminary step so that the determination of all the shares is not decisive one way or the other ; but as the High Court has pointed out it is really not necessary to consider the academic question under the Hindu law in the present proceedings, because the question referred for the decision of the High Court has inevitably to be answered in the light of facts found by the income-tax authorities and recorded in the statement of the case, and the statement of the case is definitely and clearly against the appellant and consistent with the answer made by the High Court to the question under reference. The statement of the case elaborately refers to the conduct of the parties. It points out that so far as the entries in the old family account books are concerned all the assets and liabilities were pooled on January 27, 1942, and divided into two halves ; this fact considered in the light of the representation made by the appellant to the Income-tax Officer that th....
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....e appellant who took their shares. When we turn to the statements made by the parties, however, it appears clear that the family business was stopped at the time of division and fresh business was commenced by the respective parties. The appellant himself had expressly stated that he stopped the family business and divided all the movable and immovable properties on the same day from the accounts between the two groups. Ayyamperumal makes an equally categorical statement that family business was stopped, accounts were closed and the division followed between the two groups. After this partition was made the appellant returned the notice served on him for the year 1943-44, applied under section 25A, obtained an order under that section and asked for due notice to be served on him in respect of the new business which he had started. Having regard to this material it would be difficult to suggest that the facts found in the statement of the case are not borne out by any evidence on the record. That is why the High Court has observed that it was concerned to find the factual position of the family, and in doing so academic questions as to the principles of Hindu law would necessarily p....
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....uld be a reduction of liability is not by itself proof that it was started with the main object of avoiding the excess profits liability within the meaning of section 10A ; second, the onus of proof was on the department to show that the main purpose was to avoid the payment of tax ; third, the relationship between the parties to the transaction is not by itself conclusive to prove that the motive was the avoidance of liability ; and fourth, that it was not sufficient if gaining advantage in the matter of the payment of tax was merely an incidental advantage because such an advantage may be incidental and not the main motive for the transaction. Having set out those considerations the High Court took into account the findings of fact recorded by the authorities and held that there was ample material to sustain the final conclusion of the Tribunal and that should be sufficient to dispose of the question under reference. The Tribunal accepted the findings of the Excess Profits Tax Officer and the findings thus accepted are borne out by the evidence on the record. It cannot be said that there was no evidence to support the findings. On this view the High Court answered the question ag....