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Issues Involved:
1. Whether the Hindu undivided family was entitled to the benefits of Section 25(3) of the Indian Income-tax Act after partition on 28th March 1939. Issue-wise Detailed Analysis: 1. Entitlement to Benefits under Section 25(3) Post-Partition: The primary issue revolves around the interpretation of Section 25(3) of the Indian Income-tax Act concerning the Hindu undivided family (HUF) after its partition on 28th March 1939. The family, consisting of a father and son, was engaged in money-lending business under different vilasams. Upon partition, the family's assets were divided, with the father continuing the business with his share and the son taking over other assets. The assessee claimed that the joint family business was "discontinued" due to the partition, thereby invoking Section 25(3) for tax relief. Initially, the Appellate Assistant Commissioner opined that there were distinct businesses, hence no discontinuance. However, the Appellate Tribunal later recognized it as a single business divided among family members, necessitating reassessment by the Income-tax Officer. The Tribunal's decision was contested, leading to a reference to the High Court. The High Court examined whether the partition resulted in the "discontinuance" of the business as defined by Section 25(3). The Court referred to authoritative precedents, including the Privy Council's decision in Polson's case, which clarified that "discontinuance" implies complete cessation of business, not merely a transfer of ownership. The High Court noted that the integrity and identity of the business were lost post-partition. The father and son operated separately with their respective shares, indicating a cessation of the original joint family business. The Court emphasized that partition results in the disintegration of a unified business into distinct parts, which cannot be considered a continuation of the old business. Judgment: The High Court concluded that the joint family business was indeed "discontinued" upon partition, aligning with the interpretation of Section 25(3) that requires complete cessation of business. Therefore, the assessee was entitled to the benefits under Section 25(3). The question referred to the Court was answered in the negative, against the Income-tax Commissioner, and costs were awarded to the assessee. Separate Judgment by Raghava Rao, J.: Raghava Rao, J. concurred, emphasizing that the legal integrity of the business was affected by the partition, leading to its cessation. He dismissed the Commissioner's arguments, which suggested that the old business continued despite the partition. He reinforced that the features highlighted by the Commissioner, such as continuity in premises, account books, goodwill, and customer base, did not negate the legal discontinuance of the business. Conclusion: The High Court's judgment firmly established that the partition of the Hindu undivided family resulted in the discontinuance of the joint family business, entitling the assessee to the benefits under Section 25(3) of the Indian Income-tax Act.
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