TMI Blog1964 (11) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... nd whether facts proved satisfy those tests is a mixed question of law and fact. If so, it follows that a question of law arose out of the Tribunal's order and the High Court has jurisdiction to ascertain the correctness of the finding given by the Tribunal on the question of succession. Appeal dismissed. - C.A. 1106 OF 1963 - - - Dated:- 9-11-1964 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SUBBA RAO J.---This appeal by special leave raises the question of the applicability of section 25(4) of the Indian Income-tax Act, hereinafter called the Act, to the assessment in question. One G. A. Chambers was carrying on two businesses, one in the name and style of " Chambers Co. " and the other in the name and style of " Chrome Leather Company ". The first business was concerned with export of hides, skins and mica, insurance and shipping brokerage. The said Chambers Co. was an assessee under the Indian Income-tax Act, 1918. As the business was in a bad way, in or about 1931 G. A. Chambers handed over the management of the said business to his son, K. H. Chambers. The change of management did not bring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business with a part of the assets of the principal business, it cannot be said that there is succession to the whole of the business within the meaning of section 25(4) of the Act. We shall take the second question first. G. A. Chambers, the father, was carrying on two independent businesses, one in the export of hides, skins and mica, in insurance and shipping brokerage under the name and style of " Chambers Co. " and the other under the name and style of " Chrome Leather Company ". In 1932, G. A. Chambers handed over the sole management of the former business to his son, K. H. Chambers. The son was managing the business, but not with any success. In July, 1932, the son was going to foreign countries, presumably in connection with his business. On July 7, 1932, before the son left India, G. A. Chambers wrote a letter to him informing him that by the end of August, 1932, the sum of Rs. 40,000 invested by him in the business would run out, and that unless Rs. 60,000 was invested by him (the father), which he could not afford to risk, the business could not be conducted. He, therefore, suggested to his son that the Chambers Co. could be wound up and that if he chose he could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adly stated, the father had taken over the liabilities of the company and assets, including buildings and machinery sufficient to discharge the liabilities, while the son was given the stock in trade and a small amount of debts. After this allotment, it is conceded that K. H. Chambers continued to operate the same lines of business as was carried on by Chambers Co. taking over all the constituents of that business, using the same premises, the same telephone number, post box number, private codes and trade marks and the important sections of the staff that belonged to Chambers Co. On May 23, 1933, G. A. Chambers wrote to the Liverpool and London and Globe Insurance Company, Calcutta, wherein he stated : " We confirm our conversation with your representative that inasmuch as we have transferred all our export business to Mr. K. H. Chambers, who is now running the business in his own name and at his own risk and responsibility, we shall be pleased if you will transfer the agency of your firm to him. " It is also conceded by the department that G. A. Chambers utilized his good offices in getting the Liverpool and London and Globe Insurance Company to transfer the agency of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... succession there must be, broadly speaking, a taking over of the whole of the business concerned ; .... But if a business is taken over as a whole, the fact that minor assets of the business are omitted from the transfer will not prevent there being a succession. The fact that the purchaser already has a similar business is not a material fact in establishing succession. The purchase of a business with a view to closing down would not appear to constitute succession. Other questions which have been used as tests are : (1) whether a similar trade has been carried on after the transfer ; (2) whether goodwill or other intangible assets are included in the transfer ; (3) whether staff is taken over ; (4) the treatment on transfer of the stock and debts of the transferor ; (5) whether there was an interval in the carrying on of the trade as a result of the transfer. " In Reynolds Sons Co. Ltd. v. Ogston Lord Hanworth M. R. accepted the following tests laid down by Rowlatt J. to ascertain whether there was a succession, namely : " You want to measure the income of the successor by the past history of the business ; it is therefore essential that there should be a very close id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther because it is essentially a question of fact, but I cannot avoid the view that there was material upon which the Commissioners might arrive at the conclusion that there was a succession. " This is an authority for the position that if a business was taken over as a going concern the mere fact that some assets, which were not required by the successor for the carrying on of the business, were not transferred to him would not make it any the less a succession in law. It is not necessary to multiply decisions. Succession involves change of ownership ; that is, the transferor goes out and the transferee comes in ; it connotes that the whole business is transferred ; it also implies that substantially the identity and the continuity of the business are preserved. If there is a transfer of a business, any arrangement between the transferor and the transferee in respect of some of the assets and liabilities not with a view to enable the transferor to run a part of the business transferred but to enable the transferee to run the business unhampered by the load of debts or for any other appropriate collateral purpose cannot detract from the totality of succession. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch took place in this case was not a succession within the meaning of the 4th Rule. That is not a finding of fact, but a finding of law and construction based upon the fact that one existing bank did acquire and take over, not for the purpose of extinction, but for the purpose of development, the existing business of another bank existing in another place. " So too, Mathew L. J. stated : " ' No succession ' say the Commissioners ' within the meaning of the said 4th Rule '. That is the proposition of law we have to decide as distinguished from fact, and we are entitled to differ from their view. " In Wilson Barlow v. Chibbett Rowlatt J. observed : " The question was whether here there was a succession, which is a primary question of fact upon which, of course, it is possible the Commissioners might take a wrong view of the law and apply false law. " The learned judge concluded thus : " All I can say is that I do not see my way to say that I can discern any sort of error in law here in the way in which the Commissioners have dealt with the case.... " These observations imply that if correct tests are not applied in coming to a conclusion whether there is succes ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
