TMI Blog1943 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... re than each of his nephews. The ratio was to be 26 : 19 : 19. For the year of account (1939-40) the Income-tax Officer calculated that the income of the family was ₹ 46,127, of which ₹ 44,420 had been derived from the business. By consent the year of account was deemed to commence on the 13th April 1939 and to end on the 20th April 1940. The extra days were added in order that the end of the financial year should coincide with the date of the partition. The total tax due on this assessment was ₹ 6,129 which the Income-tax Officer directed should be recovered equally from each of the three groups into which the family had been divided. The assessee was the managing member and as such he objected to the assessment. The busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these cases the position under the Act of 1918 and the position under the Act of 1922, as now amended, should be stated. Under the Act of 1918 the tax was levied on the income actually earned in the year of assessment. The Act of 1922 made a great change. It provided that the tax levied in the year of assessment should be calculated on the income earned in the previous year. In order to prevent the injustice of the double assessment of a person who was assessed under the Act of 1918 when he ceased to be chargeable under the Act of 1922, Section 25 was inserted in the new Act. Sub-section (3) of Section 25 deals with the case where a business, profession or vocation is discontinued and sub-section (4) the case where a person has succeeded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be so under the later Act. Section 3 of the Act of 1922 says that the tax shall be charged in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons, or the partners of the firm of members of the association individually. The joint family of which the assessee was the head was a taxable entity under the Act of 1918 and continued to be such under the Act of 1922 until the partition in 1940. Section 2 (9) of the Act of 1922 states that the word person includes a Hindu undivided family and a local authority. The earlier case on which Thontepu Chinna Pullayya v. Commissioner of Income-tax, Madras, is based is Jupudy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome entitled to it by survivorship. As the Full Bench which decided Commissioner of Income-tax, Madras v. Karuppiah Pillai pointed out, the decision in Jupudy Kesava Rao v. Commissioner of Income-tax, Madras was that it was not a matter of succession by another person at all. It was a matter of survivorship. The family remained joint notwithstanding the death of the member. In no sense of the word could it be said that there was succession or change in the identity of the assessee. If the decision in Jupudy Kesava Rao v. Commissioner of Income-tax, Madras that Section 26 (2) did not apply had been based on this ground without reference to transfer or change of ownership, the judgment would not be open to question so far as the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer to the question propounded must be that the assessment must be in accordance with Section 25A (2) of the Income-tax Act. There is here an obvious fallacy. When a Hindu joint family separates and its members carry on the family business in partnership, there is change in ownership. The business is no longer owned by the joint family but by the firm, an entirely different entity, and the fact that as before the profits continue to be divided equally between the same persons makes no difference. When such a change takes place, there is succession within the meaning of Section 26 (2). That being case, the assessee here is entitled to the benefit of Section 25 (4). On behalf of the Commissioner of Income-tax it has been suggested th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted v. Commissioner of Income-tax, Punjab. It is not necessary to examine these judgment in detail as we have given our own reasons for dissenting from what was said in Jupudy Kesava Rao v. Commissioner of Income-tax, Madras and Thontepu Chinna Pullayya v. Commissioner of Income-tax, Madras. The same question was raised in the Bombay High Court in Commissioner of Income-tax, Bombay v. Jesingbhai Ugarchand. On the ground that it was not desirable that conflicting decisions under the Income-tax Act, which applies to the whole of British India, should be given by different High Courts on exactly similar facts the Bombay High Court followed the decision of this Court in Thontepu Chinna Pullayya v. Commissioner of Income-tax, Madras without e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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