TMI Blog1972 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta, Karachi, Hongkong, Shanghai, London, Manchester, Basra and the Persian Gulf. The business which it was carrying on was that of bankers, commission agents, agents of joint stock companies, dealers in shares and securities, foreign exchange, etc. In the accounting year 1919 the firm incurred net loss of Rs. 12,37,413-12-2, but in 1920 it seems to have made large profits mostly "in London Exchange Account." It, however, claimed depreciation in shares and securities amounting to Rs. 9,26,730-5-8 shown under the head depreciation in shares and securities. On 8th September, 1920, and 4th December, 1920, two companies were incorporated in Bombay, the former was known as the Bombay Trust Corporation Ltd. and the latter as E.D. Sassoon Co. Ltd. (hereinafter called the "assessee-company"). The Bombay Trust Corporation carried on business in Bombay which comprised mainly the business of dealers in shares, securities and foreign exchange. This company (B.T.C.) had by the end of December, 1920, investments in shares and securities to the extent of Rs. 3,23,78,494. By the end of 1921, investments in shares and securities had risen to Rs. 4,31,32,212 and by the end of December, 1922, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany's accounts were examined by the examiner of accounts who made the following note on 12th October, 1922: "With regard to the second item it would be seen from the last year's 'B' form put up herewith that the company is a habitual dealer of shares and it was allowed Rs. 9,26,730-5-3 as a set off against the profits of 1920, the loss on shares and securities (depreciation). Hence, appreciation of Rs. 9,27,708.67 will have to be taxed this year." On the above report the Income-tax Officer endorsed on the 23rd December, 1922 , as follows: " Note:-- Shares and securities of Rs. 6,55,895 and Rs. 3,28,112....book entry. Securities being valued at the end of the year and appreciation or depreciation brought into the accounts. These securities are being taken over by the new company, B. T. C. Ltd., Bombay. Show this on instructions from their London House only and these items may therefore be disregarded for income-tax purposes." It may be mentioned that the firm was being assessed for the year 1921-22 under the Income-tax Act, 1918, on the income of the accounting year 1921 and for the assessment years 1922-23 to 1948-49 the assessee-company was being assessed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ?" Except for the second question, the High Court answered the other four questions against the revenue, the appellant in Civil Appeal No. 162 (NT) of 1969. On the second question its answer was in favour of the revenue and against the assessee-company in respect of which it has filed Civil Appeal No. 26 of 1969. On behalf of the revenue it is submitted that question No. 1 is the crucial question in that the determination of what is meant by "discontinuance of business, profession or vocation" for purposes of section 25(3) would also furnish the answers to the other questions in the appeal. No arguments were addressed to us on those questions. Sub-section (3) of section 25, under which the relief is being claimed, is as follows: "(3) Where any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918 (VII of 1918), is discontinued, then, unless there has been a succession by virtue of which the provisions of sub-section (4) have been rendered applicable no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charged with tax once in respect of every year's income and twice in respect of one year's income. There is no dispute in this case that the assessee-company had discontinued its business from the 28th December, 1948, when it went into liquidation. The only dispute is, whether the assessee-company carried on the business of the firm which was assessed to tax under the 1918 Act and whether the firm was charged to tax under the 1918 Act. It may be mentioned that in sub-section (3) there is a clear reference to the business and not to the assessee and, therefore, that sub-section applies even if the person claiming the relief was not himself charged under the 1918 Act but his predecessor-in-interest was so charged. It is contended on behalf of the revenue that the assessee-company did not carry on the same business as that carried on by the firm in that the business in dealing in shares and stocks which the firm was carrying on was not carried on by the company which merely held those shares as investment and did not deal in them. It has been noticed earlier that the firm was carrying on several businesses one of which was dealing in shares and stocks and when the assessee-company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was charged to tax. 1919: This was a year of huge loss and no tax was charged. 1920: There was no positive income from shares or share-dealings. It is also not necessary to consider tax payments by the firm during these years because the entire stock-in-trade of the business in share-dealings and securities belonging to the firm was taken over by another limited company, the B.T.C. Ltd., assessed separately and the appellant did not succeed to that business at all. 1921: No income-tax was charged on the company at all, there being a net loss of more than Rs. 12 lakhs." It may be mentioned that the statement that no tax was charged for the year 1918 is contrary to the material on record nor was the Assistant Appellate Commissioner justified in holding that the entire stock-in-trade of business in share-dealings and security belonging to the firm was taken over by another limited company, the B.T.C. Limited, because the Appellate Tribunal on both these points has iot confirmed those findings. The Tribunal summarised its conclusions as follows: "(i) For the assessment year 1918 E.D. Sassoon Co., a firm, was assessed to tax under the Act of 1918; (ii) For the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not hold that the assessee was not dealing in the business of stocks and shares. On the other hand, the Appellate Assistant Commissioner, while considering the claim of loss in respect of Shanghai property sold by the assessee-company, observed: "Ever since the incorporation of the company on December 4, 1920, as a private limited company and till it went into liquidation on December 29, 1948, the assessee's business activities consisted of:.....(v) dealings in shares and securities." The High Court has taken into consideration the assessment orders for the years 1921-22 and 1922-23 dated the 10th January, 1923, for the conclusion that the assessee-company was taxed on profits on dealings in shares and stocks in respect of those years which in its view showed beyond doubt that the company was trading, in shares and securities for the year 1921 immediately after it took over from the firm. Even otherwise also, there is sufficient material on the record to hold that the entire business of the firm which included dealing in shares and stocks was taken over by the assessee-company as a going concern, that large holdings of stocks and shares were transferred to the assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. There is no mention in its order that these shares were transferred to B.T.C. and not to the assessee-company. The shares and securities were only transferred to the B.T.C. Ltd. in 1922. In any case, irrespective of the question whether the assessee-company was dealing in shares after it had taken over the business from the firm, it is clear that the assessee-company was carrying on several other businesses which it had taken over from the firm as a going concern. Even where one or two business activities are discontinued after the assessee-company took over, none the less it would not justify us in holding that the business of the firm which was taken over has been discontinued, because under section 25(3) there is no restriction to the applicability of the exemption only to income on which the tax was payable under any particular head. This is what was held by this court in Commissioner of Income-tax v. Chugandas Co. Shah J., after noticing that what is to be regarded as income, profits and gains of business, profession or vocation within the meaning of section 25(3) for which exemption may be obtained on discontinuance had given rise to difficulties, observed at page 22: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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