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TMI Blog1964 (11) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... 932 G. A. Chambers transferred the business to his son, K. H. Chambers, and that after the said transfer, K. H. Chambers carried on the business in his own name till January 1, 1948, when the business was taken over by a limited company. For the assessment year 1948-49 K. H. Chambers claimed relief under section 25(4) of the Act on the ground that the business had been assessed under the old Act of 1918, when it was carried on by his father, G. A. Chambers, and that the said Chambers transferred the business to him towards the end of 1932. The Income-tax Officer, by his order dated March 18, 1949, held that K. H. Chambers did not take over the business of his father carried on in the name of " Chambers & Co. as a whole running concern " and, therefore, the assessee was not entitled to relief under section 25(4) of the Act. On appeal the Appellate Assistant Commissioner agreed with the Income-tax Officer and held that the business carried on by K. H. Chambers was not the same business which was originally assessed under the old Act of 1918 in the hands of his father. On a further appeal, the Income-tax Appellate Tribunal came to the same conclusion and found that the identity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Chambers & Co., either by interesting financially one or other of the firm's connections or by offering to work on a commission basis. On July 8, 1932, the son replied to the father to the effect that he would prefer to start right afresh in his own name or in the name of Chambers & Co. ; he also suggested that he could get a place for less rent and use a smaller staff ; and requested his father to allow him to use the existing private codes. On December 5, 1932, G. A. Chambers asked his auditors, M/s. Fraser & Ross, to close the accounts of Chambers & Co. and send the balance-sheet, venture and profit and loss accounts for 8 months ending November 30, 1932, together with the schedule of accounts taken over by K. H. Chambers showing the amount due to him from K. H. Chambers. In that letter G. A. Chambers informed the auditors that from December 1, 1932, K. H. Chambers would be running the export business separately in his own name ; that he had asked Chambers & Co. " to close their accounts up to the end of November and transfer all such accounts to Messrs. Chambers and Company relating to G. A. Chambers to us so that we may run Messrs. Chambers and Company's account at Chrome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts emerge : G. A. Chambers was conducting two businesses, one under the name and style of Chambers & Co. and the other under the name and style of Chrome Leather Company. The Chambers & Co. was doing export business. Some months prior to July 7, 1932, K. H. Chambers invested a sum of Rs. 40,000 in the business conducted by Chambers & Co. and was actually managing the same. The business was running at a loss and the father was not anxious to continue the business and, therefore, he made some alternative suggestions to his son. But the son was anxious to continue the business independently. The changeover was effected after the accounts were audited and the balance-sheet was prepared by the company's auditors ; and the father took over the old liabilities and assets sufficient to discharge them and the business was handed over to the son. Thereafter, the son was carrying on the business of Chambers & Co. in his own name, in the same premises, taking over all the constituents of Chambers & Co., using the same codes and trade marks and the important members of the staff of the company. It is true that the name of Chambers & Co. was retained by the father, but all the advantages of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oon High Court in Commissioner of Income-tax v. N. N. Firm had to consider the meaning of the word " succeeded " in section 26(2) of the Income-tax Act. Page C.J., giving the opinion of the court, observed : " In order that a person should be held to have ' succeeded ' another person in carrying on a business, profession or vocation, it is necessary that the person succeeding should have succeeded his predecessor in carrying on the business as a whole. " The Rangoon High Court again in Commissioner of Income-tax v. A. L. V. R. P Firm reiterated the same principle. What is the meaning of the expression " whole business " has been the subject of other decisions. A Division Bench of the Patna High Court in Jittanram Nirmalram v. Commissioner of Income-tax , after considering the relevant decisions, both English and Indian, said that it was sufficient if there was substantial identity or similarity in the nature and extent of the activities carried on between the two firms, i.e., the transferor and the transferee firms. The court observed therein : " For the application of section 26(2) or section 25(4) it is not essential in every case that the successor firm should have mathema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as preserved and the same business was continued. The father reserved for himself some assets for the purpose of discharging the debts. He did so not for the purpose of running the same business by himself but only to help the son to carry on the same business more effectively. If so, it follows that on the facts found or admitted there is a clear case of succession in the present case. Learned counsel for the revenue argued that whether there was succession or not was a pure question of fact and the High Court had no jurisdiction to question the correctness of the finding given by the Tribunal to the effect that there was no succession to the business. This court in Meenakshi Mills v. Commissioner of Income-tax laid down the following propositions which are relevant to the question now raised before us : (a) Where an ultimate finding on an issue is an inference to be drawn from the facts found, on the application of any principle of law, there is a mixed question of law and fact, and the inference from the facts found is, in such a case, a question of law and is open to review by the court. (b) Where the final determination of the issue does not involve an application of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at some length the facts placed before him, refused to go further into the matter because the finding of succession was essentially a question of fact. But the facts in that case disclosed that the correct tests were applied and, therefore, no illegality was committed by the Commissioners. The said decisions did not lay down that in every case the finding of succession is one of fact. Indeed, the first two decisions clearly maintained that a finding on a question whether a succession is one within the meaning of a particular provision or whether it is vitiated by any error of law is not final. The English view is also in accord with that expressed by this court. The question, therefore, is whether a finding that a person succeeded another in his business within the meaning of section 25(4) of the Act is a finding of fact. The expression " succession ", as stated by Simon in his book on Income-tax, has acquired a somewhat artificial meaning. The cases we have considered supra and similar others have laid down some tests, though not exhaustive, to ascertain whether there is succession in a given case or not. The tests of change of ownership, integrity, identity and continuity of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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