TMI Blog1950 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... Panna Lal Kishori Lal Kamal Narain Hirday Narain Shri Nath Ram Mohan Shyam Mohan Krishna Mohan The joint family was carrying on extensive business in Banaras brocade goods and in the year 1943-44 it had made a profit of ₹ 26,802. In 1944-45 upto 16th July, 1943, it made a profit of ₹ 64,775 which was well in excess of the amount on which excess profits tax was payable, i.e., ₹ 36,000. On the 16th July, 1943, the adult members of the family are said to have made a partial partition by dividing the Banaras brocade business, the status of the joint family remaining joint and the other property also not being divided. After this division on the 16th of July, 1943, on the 17th of July, 1943, they started two partnership firms under the name and style of (1) Sohan Pathak Girdhar Pathak, and (2) G.M. Pathak Co. The two firms carried on the same business as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... branch took greater responsibility for the losses, if any, than the other two branches of Ganesh and Shyam Sunder, and why Girdhar's branch was so favourably treated as not to be made liable for any losses at all, while each branch was given the same interest of annas 4 in each business. On the finding that the transaction had been entered into with the main purpose of avoiding payment of excess profits tax, the Excess Profits Tax Officer, under Section 10A, held the assessee liable for the profits of the business. It may be mentioned that during the period from the 17th of July, 1943, to the 8th of October, 1943, the rest of the assessment year, the Banaras brocade business made a profit of ₹ 25,983. The Appellate Tribunal came to the conclusion that the Excess Profits Tax Officer was right in taking action under Section 10A. On an application filed by the assessee the following questions have been referred to us for answer:- I. Whether in view of the fact that the partial partition had been accepted by the Income-tax Officer and the business was treated as having been discontinued for the purpose of assessment under the Income-tax Act, the same business c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment provided us with typed copies, but even they were not of much assistance. We looked into the appellate order carefully and it is only by implication that the Appellate Tribunal can be said to have accepted the findings of the Excess Profits Tax Officer. After having, in paragraph 3, quoted the grounds on which the Excess Profits Tax Officer had overruled the contention of the assessee and having mentioned in paragraph 6 that counsel for the Department had urged that the onus had been fully discharged and that he had referred to the grounds on which the Excess Profits Tax Officer had invoked the provisions of Section 10A, the Members of the Tribunal in paragraph 9 say: On the facts of the case, we hold, therefore, that the Excess Profits Tax Officer was right in taking action under Section 10A. From that we can only assume that they accepted the grounds which they had set out in paragraph 3 as the grounds on which the Excess Profits Tax Officer had acted. They do not say so at any place. The portions of their appellate order where they seem to have given any finding, of their own, on questions of fact are to be found partly in paragraph 7 and partly in paragraph 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons given by us in our decision quoted above our answer to the question is that the Excess Profits Tax Officer was not bound by the decision of the Income-tax Officer and if under Section 10A of the Excess Profits Tax Act he came to the conclusion that the main purpose behind the transaction was avoidance of payment of excess profits tax, he could proceed in accordance with the provisions of that section and make the necessary adjustment. As regards the second question, Mr. Pathak has urged that the partial partition of the Hindu undivided family and the formation of two different firms was not a transaction within the meaning of Section 10A of the Excess Profits Tax Act. The argument is that the transaction must be something in the nature of a business deal, the main purpose of which is avoidance or reduction of liability, and that there should be a liability. It is urged that it could not have been intended by Section 10A to give the Excess Profits Tax Officer authority to nullify any act, not being in the nature of a business deal, by which the members of the assessee family decided to break up their status. It is further urged that on the breaking up the joint family s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner, make such adjustments as respects liability to excess profits tax as he considers appropriate so as to counteract the avoidance or reduction of liability to excess profits tax. It means, in short, that if excess profits tax would be payable but for a certain transaction or transactions and the main purpose behind that transaction or those transactions is the avoidance or reduction of liability then the Excess Profits Tax Officer may ignore such transaction or transactions for the purposes of assessment. There can be no doubt that if there had been no partial partition and the business had been carried on as before there would have been the liability to pay the excess profits tax by the joint family. If the joint family effected a partial partition and started carrying on the business in partnership with the main object of evading excess profits tax liability then we fail to see why Section 10A of the Act should not be made applicable simply because the business became the separate property of the family. Mr. Pathak has urged that it is open to a member of the joint Hindu family to sever his status either in whole or in part and the Excess Profits Tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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