TMI Blog1960 (12) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... hat G.A. Chambers was assessed under the Act of 1918. He further came to the conclusion that what took place in 1932 was that G.A. Chambers closed down his business and that K.H. Chambers commenced a fresh business which, though it dealt in the same lines as the former business, was yet not a continuation of the business of Chambers and Co. He supported this conclusion by a reference to the division of assets and liabilities effected in 1932, which showed that a considerable portion of the liabilities and assets were retained by G.A. Chambers and that the trade name of Chambers and Co. was not also taken over by the business conducted by K.H. Chambers. The conclusion reached by him was that the business started by K.H. Chambers in 1932 was not the same business carried on previously by G.A. Chambers, his father. That resulted in the finding that there was no identity between the two businesses and that it could not, therefore, be claimed that the assessee's business was the one that had suffered tax under the 1918 Act. Successive appeals carried to the Appellate Assistant Commissioner and the Appellate Tribunal failed. The Tribunal also held that: The identity of the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my financier, when recovered, the proceeds of the debts now due, less the cost of recovery, less any losses on contracts in course of execution or in transit ... If I get this finance, I would prefer to start right afresh in my own name or in the name of C and Co. if you do not wish to trade under this name in future. I can get a place for less rent and use a smaller staff. I hope you will allow me to make use of the existing private codes.. . In December, 1932, G.A. Chambers addressed the auditors, Messrs. Fraser and Ross, and informed them that from the 1st of December, 1932, K.H. Chambers was running the export business separately in his own name, that the accounts of Messrs. Chambers and Co. were to be closed up to the end of November, and that those accounts relating to G.A. Chambers were to be transferred to the account of Messrs. Chambers and Co., in the books of the Chrome Leather Co. It may be mentioned here that G.A. Chambers was also the proprietor of the Chrome Leather Co. and that part of the accounts relating to G.A. Chambers in Chambers and Co., which was sought to be transferred to the books of the Chrome Leather Co., covered those assets and liabilities of Cham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Chambers wanted to continue the business even if the name of Chambers and Co. was not to be associated with the trade in future. No doubt he mentioned that he would prefer to start right afresh in my own name, and admittedly, the business as conducted by K.H. Chambers was not conducted in the name of Chambers and Co. Nevertheless it is conceded by the department that K.H. Chambers continued to operate the same lines of business as were carried on by Chambers and Co., taking over all the constituents of the business, using the same premises with the same telephone number, post box number, codes and trade marks and important sections of the staff that belonged to Chambers and Co. G.A. Chambers also utilised his good offices in getting the Liverpool and London and Globe Insurance Company to transfer the agency of that company with Chambers and Co. to the business thereafter to be conducted by K.H. Chambers. It is on these features that the assessee relies in seeking to establish that there was a real succession to the business within the meaning of section 25(4) of the Indian Income-tax Act. What is succession to a business is no doubt primarily a question of fact, but the infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness to another person who thereafter carried it on. It would be seen from this decision that though a part of the business was left with the retiring partner and the successor took over only the remaining part of the business, it was nevertheless held to constitute a succession within the meaning of the Act. The facts in Commissioner of Income-tax v. Mansookhlal Zaveri [1937] 5 ITR 664 are to some extent similar to the facts of this case. There a firm consisted of two partners; it got into financial difficulties and was dissolved. More than three months after such dissolution, one of the partners executed a deed of release by which he surrendered his right to the stock-in-trade and furniture, and to the use and occupation of the business premises. He also gave up all claims to the outstandings and assigned to the other partner the right to the trade marks of the firm. But before dissolution, certain major creditors were paid off. But apart from this, the assessee took over the assets and liabilities of the firm, carried on the same kind of business in the same premises, though on a smaller scale. The name of the business was also slightly altered. On these facts, the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as that K.H. Chambers continued to carry on the identical lines of business in the same premises with the same telephone number, post box number, codes and trade marks and important sections of the staff that belonged to Chambers and Co. That was found as a matter of fact by the Tribunal in the statement of the case. Learned counsel for the department relies upon Hari Ram Gopi Nath v. Commissioner of Income-tax [1944] 12 ITR 367 . That was a case where as a result of a dispute among certain partners who were running four businesses under a particular name, one partner looked after two of the shops. The other partners started two new firms in separate premises with new sets of account books. Subsequently, as a result of arbitration, the disputing partner was bought out and the remaining partners were enabled to realise the outstandings and discharge the liabilities of the old firm. But the significant feature in that case was that the right to carry on business under the trading name of the old firm was barred to all the partners. On reference, the learned judges of the Lahore High Court took the view, that the new firm was entirely different from the old firm which was in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed judges pointed out that what section 8(3) of the Act does is to take away the fiction introduced by section 8(1) of the Act, one of the purposes of that sub-section being a question of computation of depreciation. It would not to our mind be justifiable to apply any principle derivable from this decision except in the context of the very limited scope of the matter which the learned judges had to consider in that case. There are only two circumstances upon which the department is enabled to rely in opposing the conclusion that there was a succession. They are, firstly, that the major part of the assets and liabilities were retained by the transferor and that the firm's name was not transferred suggesting thereby that there was no transfer of the goodwill. It is not denied that there, is otherwise a complete identity in the lines of business that were carried on by K.H. Chambers, that the same constituents were taken over and that the trade marks, codes, premises, etc., of the old firm were also enjoyed by the firm conducted by K.H. Chambers. If before the actual taking over by K.H. Chambers, those liabilities which were retained by G.A. Chambers had actually been discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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