TMI Blog1951 (1) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Penang) and the family's share in Bagan Datoh were allotted to the father and the son took the remaining three assets or activities, i.e, S.N.A.S.A. (Penang), A.N. (Penang) and S.N.A.S.A. (Trust). During the assessment year 1939-40, with which this reference is concerned, the assessee claimed that the joint family was not liable to be taxed for the period between 13th April, 1938, and 28th March, 1939, the date of the partition on the basis that it was entitled to the benefit 0of Section 25(3) of the Indian Income-tax Act. The accounting year for the assessment year is from 13th April, 1938, to 13th April, 1939. The assessee claimed that the joint family business became discontinued by reason of the partition in March, 1939, and that therefore Section 25(3) applied. It was originally held by the Appellate Assistant Commissioner that the business under different vilasams represented five distinct and separate businesses of the Hindu undivided family which were divided between the two members, the father taking two businesses in their entirety and the son taking over the other three remaining businesses. It was therefore thought that there was no discontinuance within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cession as the partition took place prior to the date of the coming into force of the Amending Act. It has now been authoritatively settled by the Privy Council in Polson' s case (supra) which approves the decision of this Court in Meyyappa Chettiar v. Commissioner of Income-tax, Madras ILR 1945 Bom. 938; 13 ITR 384, that the word discontinued in the sub-section means a complete cessation of the business and does not include transfer of business. Mere change of ownership, therefore, without cessation of business does not amount to discontinuance of such business. In Meyyappa Chettiar v. Commissioner of Income-tax, Madras ILR 1944 Mad. 166; 11 ITR 247, there was no splitting of the business in the partition which occurred in the family but the business which was a long standing one and which was carried on till the date of the partition was continued after partition by the members of the family as partners. The continuity of the business was kept up by continuing it at the same place and perhaps in the same accounts. The case before the Privy Council, Polson (supra) was one of assignment of the business carried on by an individual to a company. The integrity and identity of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuation of the old business when once what was a single unit was split up into various component parts. The parts separated are distinct and separate parts of a unified whole but the unity and the integrity between the parts are no longer possible unless there was a reunion or partnership. This is not a case of mere transfer of ownership as in Polson' s case (supra )or in Meyyappa Chettiar's case (supra) . It is a case of disintegration of a unit into its component parts so as to annihilate the unity of the business. Several decisions have been cited on both sides, particularly decisions in which the word succession had been interpreted. Sections 25 and 26 of the Act form part of a single scheme and as observed by Lord Simonds in Polson' s case (supra) their interaction should not be ignored. Section 26 is primarily concerned with the apportionment of the tax where relief under Section 25 is not possible. But Section 26(2) provides for the case of succession and apportionment of tax in cases not falling under Section 25(4). That section also was amended in 1939. In Commissioner of Income-tax, Burma v. N. N. Firm [1934] 2 ITR 85 the Rangoon High Court had to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that there was no discontinuance of the business. The learned Judges summarised their conclusions, after a review of the authorities at page 203 of the report. It is difficult to follow the reasoning of the learned Judges particularly their reasoning at page 204. The second illustration given on that page is:- A and B jointly carry on only one running business, e.g., a shop. They divide the shop with the result that each of them gets of the shop as a going concern. Here it may be said that the business has lost its integrity and perhaps also its identity but can it be said that it has discontinued ? This conceivably represents a case on the border line of continuity and discontinuity of business. Now supposing that A and B run a joint business with 9 branches. They divide the business in such a way that 4 branches go to each of them and one branch is divided into 2 moieties. In such a case, the business which falls to the share of each may well be regarded as whole and identical in spite of the fact that they include a fraction of an old branch as was done in Commissioner of Income-tax, Burma v. A.L.V.R.P, Firm [1940] 8 ITR 531 As so regarded, the conclusion would be a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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