1961 (8) TMI 66 - HC - Income Tax

Summary

Issues Involved:
1. Refund of excess profits tax.
2. Limitation period for refund claims.
3. Application of section 8 of the Excess Profits Tax Act.
4. Effect of partial partition on Hindu undivided family status.
5. Applicability of Article 226 of the Constitution for pre-Constitution matters.

Issue-wise Detailed Analysis:

1. Refund of Excess Profits Tax:
The petitioner, a Hindu undivided family, sought the refund of Rs. 11,175-9-0 paid as excess profits tax for the period from October 19, 1942, to July 10, 1943. The Excess Profits Tax Officer initially refused the refund, but the Supreme Court later ruled that the brocade business was no longer part of the Hindu undivided family post-partition, and thus, the profits from the partnership businesses could not be included in computing the tax liability of the Hindu undivided family. Consequently, the petitioner was entitled to the refund.

2. Limitation Period for Refund Claims:
The Excess Profits Tax Officer denied the refund on the grounds of limitation under section 50 of the Income-tax Act read with section 21 of the Excess Profits Tax Act. However, it was argued that the refund claim was based on the Supreme Court's decision, and under section 66A(4) of the Income-tax Act, effect must be given to the Supreme Court's order without the limitation constraints of section 50. The court agreed with this argument, ruling that the claim was not barred by limitation.

3. Application of Section 8 of the Excess Profits Tax Act:
The Excess Profits Tax Officer also argued that the business continued in a deflated form and thus section 8, which pertains to the commencement of new businesses, did not apply. The court supported this view, citing the Madras High Court decision in Ramaswami Raja v. Commissioner of Excess Profits Tax, which stated that as long as there is no change in ownership, the business, even if continued in a dwindled form, does not constitute a new business under section 8.

4. Effect of Partial Partition on Hindu Undivided Family Status:
The department contended that the partial partition of the brocade business led to a disruption in the Hindu undivided family status, implying a change in the person carrying on the business. The court rejected this argument, clarifying that under Hindu law, a partial partition of a business does not disrupt the joint family status.

5. Applicability of Article 226 of the Constitution for Pre-Constitution Matters:
The department argued that since the tax was paid before the Constitution came into force, relief under Article 226 could not be granted. The court dismissed this argument, stating that the refund became due only after the Supreme Court's decision in 1953, making it a post-Constitution matter. Therefore, the petitioner was entitled to seek relief under Article 226.

Conclusion:
The writ petition was allowed, and a writ of mandamus was issued requiring the respondents to refund the amount of Rs. 11,175-9-0 to the petitioner. The petitioner was also entitled to the costs of the petition.