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TMI Blog1971 (8) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed on Novbmber 2, 1948, the partners being the aforesaid erstwhile three coparceners of the Hindu undivided family (hereinafter referred to as " H. U. F. ") and R. Gopamma, a widowed daughter of R. Hanumanthappa. The partnership worked under the name and style of R. Hanumanthappa and Son, cotton merchants. It is common ground that it did the same business which was being done by the H. U. F. The business assets and liabilities falling to each coparcener's share were entered in their personal accounts and then retransferred to the partnership firm as contribution of capital with the exception of a few trade debts. In the deed of partnership it was stated in paragraphs 2 and 3 as follows : (2) " WHEREAS the aforesaid R. Hanumanthappa, R. Rama Setty and R. R. Srinivasamurthy were carrying on, as members of a Hindu undivided family, a family business as cotton merchants, till they became divided on November 2,1948, and the said three parties desire to continue the family business constituting themselves into a partnership. (3) WHEREAS it is agreed that the aforesaid Sreemathi Gopamma shall also be admitted into the partnership constituted for the purpose of the carrying on of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the income earned during the previous year. A situation, therefore, arose that upon the introduction of the new Acts the assessee had to pay tax in respect of the income of the same year both under the earlier statute and under the later enactment. It was with a view to removing this hardship and saving the assessees from double taxation that provision was made in sub-section (3) of section 25 of the new Act to give relief to the assessees to the extent possible. The asseseee, in the present case, was being assessed under the Mysore Income-tax Act, 1922, and it could certainly claim the benefit of section 25(3) of the Mysore Art, provided it could prove discontinuance of the business within section 25(3). In support of the contention that there had been discontinuance of the assessee's business as contemplated by section 25(3) of the Mysore Act it was urged inter alia, before the income-tax authorities that on partition the business had disintegrated into several parts which had been allotted individually to each coparcener thereby connoting discontinuance of the business. The assets which had been acquired by the firm were of the divided members and did not belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax and Hanutyam Bhuramal v. Commissioner of Income-tax and it had been uniformly decided that these words did not cover mere change of ownership but referred only to a complete cessation of the business. Their Lordships entertain no doubt of the correctness of these decisions, which appear to be in accord with the plain meaning of the section and to be in line with similar decisions upon the English Income Tax Acts. Nor has their correctness been challenged in the judgment under appeal or in the argument before their Lordships." It was pointed out that under the Indian Act before it was amended in 1939, section 25(3) gave relief in the event of discontinuance. The amendment only introduced a qualification that if there was a succession in respect of which relief was given there should not be any relief upon discontinuance. It did not enlarge or alter the meaning of " discontinuance ". In the first case referred to by their Lordships, a company went into voluntary liquidation and the liquidator transferred the business to a new company which continued that business. It was held that the business was not discontinued within the meaning of section 25(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the business. A great deal of emphasis has been laid on behalf of the respondent assessee on the integrity of the business carried on by the H. U. F. having been broken by the disruption of the family and it is claimed that the business of the family must be deemed to have totally ceased or discontinued on such disruption. Reliance has been placed on a number of decisions out of which mention may be made only of S. N. A. S. A. Annamalai Chettiar v. Commissioner of Income-tax in which a Hindu undivided family consisting of a father and son carried on money-lending business under different vilasams. There was a partition in 1939 under which some of the vilasams were allotted to the father and the rest were allotted to the assessee. The Madras High Court held that as the assets of the Hindu undivided family were split up on partition, the family business no longer continued its existence but was terminated and there was, therefore, a discontinuance within the meaning of section 25(3) of the Indian Act. It was observed by the court that the mere fact that the father continued the same books of account and the customers of the money-lending business were to some extent identical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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