TMI Blog1985 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in holding that the assessee was not entitled to the relief under section 25(4) in the year 1949-50 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the succession took place on October 12, 1948, and, consequently, the benefit 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 file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first two questions were, accordingly, answered in the affirmative and in favour of the Revenue. The moot question is when did the succession, if at all, take place.. There was no controversy in that there was succession. The Tribunal had recorded that the succession took place on 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 discont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid period, and, if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference:" It is not necessary to deal with the provisos which make subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that he might further claim that the income, profits and gains of the previous year should be deemed to have been the income, profits and gains of the said period. So far as the first relief was concerned, in the facts of the case before the Bombay High Court that the joint Hindu family would 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the relative assessment year. Though the year of assessment was the financial year, the previous year of an assessee need not necessarily be the previous financial year, for, this expression had to be understood as defined by section 2(11)(a) of the Act. This court was of the view that sub-section (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 1943. This is the principle, according to the Allahabad High Court, laid down by this court in the case of CIT v. Srinivasan [1953] 23 ITR 87. The same principle, according to the Allahabad High Court, was laid down by the Bombay High Court in the case of Ambaram Kalidas v. CIT [1951] 19 ITR 227. Applying 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya J., after setting out the facts, expressed the view that such I a construction should be placed on the expression " end of the previous year in section 25(4) which should be consistent with the, object of the provision. This " end of the previous year ", therefore, could not be taken to be October 7, 1943, 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 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers had taken his share after having understood the accounts. On, April 30, 1943, a partnership deed was executed between the three adult coparceners of the HUF; the minors were not admitted to the benefits of the partnership but amounts were credited to the accounts in their names through their guardians. 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 " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to be valid and not to infringe the rule against the rule of perpetuity, must, where, there are no lives or life in being to be taken into account, arise not later than the term of twenty-one years from its creation. It was contended that as the trust for sale in that case arose at the expiration of 21 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 dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25(3) on the theoretical assumption that the firm commenced business on April 1, 1943, and, therefore, the succession took place on that date. In our opinion, having regard to the facts and circumstance of this particular case, in the background of relevant provisions of law and the relevant documents, it is 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 (Kunw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership would come into effect on October 12, 1948, but the intention to carry on business jointly from the date of the division of assets is also writ large-it is clear in this case that succession took place on October 11, 1948. One should take pragmatic approach in these matters and not get enmeshed in technicalities. In the facts of this case and in view of the entries in the account books, there was succession on October II, 1948-succession not only to the assets of the business as co-owners but succession to the business. The succession to the assets with which the business was carried on and the assent of the co-owners to carry on the business in partnership from the very next day is evidenced by the document of partnership. It is to presumed that what was divided was not merely assets but business. It is true that co-ownership of assets merely does not ipso facto mean co-ownership of the business but to hold them as co-owners of business as evidenced from the facts of this case and the subsequent conduct can lie taken into consideration in certain cases like this. Looked at from this point of view, there is really no question of any conflict arising in the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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