TMI Blog1950 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried on by the executors as such, as a going concern or that it was being carried on for the benefit or loss of the testator's estate is not relevant for the present discussion. The only relevant question under Section 25(4) of the Indian Income-tax Act is whether in respect of the business there is a succession to another person. This is a provision to give relief and the scope of the relief must be governed by the words used in the Act. In our opinion the answer to this question, on the facts of the present case, must be in the affirmative and the date of such succession must be considered to be the death of the testator, which was on the 9th of April, 1942. The result is that the appeal fails - - - - - Dated:- 21-12-1950 - Judge(s) : KANIA., PATANJALI SASTRI., DAS JUDGMENT The Judgment of Kania, C.J., and Das, J., was delivered by KANIA, C.J.---This is an appeal from a judgment of the High Court at Bombay delivered on a reference by the Income-tax Appellate Tribunal under the Indian Income-tax Act. The material facts are these. The assessee (appellants) are the executors of the will of Mr. J.K. Dubash who died on the 9th of April, 1942, having made his la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 9th of April, 1942, when the testator died. The first question submitted for the High Court's opinion related to this dispute. The second question referred to the High Court for its opinion was in respect of an amount paid by the executors to the widow of the testator. That question was answered against the appellants by the High Court. Learned counsel appearing for the appellant intimated that he did not want to contest the High Court's decision on the point. The appeal therefore is limited to the first question only. Section 25 of the Indian Income-tax Act, 1939, gives certain concessions in respect of a business where tax had been paid by the person carrying the business under the provisions of the Indian Income-tax Act, 1918. The material part of sub-clause (4) of Section 25 is in these terms :--- "Where the person who was at the commencement of the Indian Income-tax (Amendment) Act, 1939 (VII of 1939) carrying on any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918, is succeeded in such capacity by another person ............." The scheme of Section 25 read with the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss by another person on the day of the settlement. Similarly, in the event of his death intestate his heir-at-law will succeed to the business on the date of his death. The argument advanced on behalf of the appellants that in the present case having regard to the terms of clause 13 of the will there has been "no succession in such capacity to another person" because the executors were carrying on the business only with a view to sell it as a going concern, cannot be accepted because on the day of the death of the deceased the estate including the business got vested in the executors, and the executors carried on the business within the meaning of Section 3 read with Section 10 of the Act and as such became personally liable as assessee. Thus there came about a change in the assessee and therefore "a succession in such capacity" took place within the meaning of Section 25(4) of the Income-tax Act. It seems clear that if the testator had transferred the business to a trustee, although the trustees will not be the beneficial owners, in law there will be a succession of the business to another person within the meaning of Section 25(4) of the Indian Income-tax Act. If in such a case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1922 was passed which resulted in the profits of the year 1921-22 being assessed twice over, once in that year as the income thereof "on adjustment" under the Act of 1918 and once in the next year as the income of the "previous year" under the Act of 1922 : [see Commissioner of Income-tax, Bombay v. P. E. Polson]. The relief was, however, confined to discontinued businesses, as, in cases of succession till 1938 the successor alone was assessed to tax on the whole of the profits of the previous year including those earned by his predecessor before the succession occurred. But the Indian Income-tax (Amendment) Act, 1939, (hereinafter referred to as the amending Act), having amended Section 26(2) so as to provide, in the case of a succession in business, profession or vocation, for the assessment of the predecessor and the successor, each in respect of his actual share of the profits of the previous year, the relief was extended, by enacting Section 25(4), to cases of succession occurring after the commencement of that Act, with the same object as in the case of discontinuance, namely, to redress the hardship of the business having been charged twice over on the income of 1921-22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention primarily to the person who receives the income, profits or gains rather than to the ownership or enjoyment thereof. The assessee is defined in Section 2(2) as the person by whom the income-tax is payable and by Section 10 the tax is payable by an assessee who carries on the business, profession or vocation. The statute thus fastens on the person who carries on the business, etc the liability to pay the tax on the profits earned by him regardless of their destination or enjoyment. It is also worthy of note that in several instances persons who have no proprietary or other right in the income charged, to tax are made liable to pay the tax for no other reason than the convenience of assessment and collection. Such instances are to be found in Section 26(2) proviso, Section 18(7), Section 23A(3), Section 25A and Section 42(1). As observed by Lord Cave in William v. Singer Others "the fact is that, if the Income Tax Acts are examined, it will be found that the person charged with tax is neither the trustee nor the beneficiary as such but the person in actual receipt and control of the income, which it is sought to reach ". There seems to be no warrant, therefore, to insis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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