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Interpretation of Section 8(1) of the Excess Profits Tax Act regarding change in persons carrying on a business due to family disruption and partnership formation. Analysis: The case involved a question on whether a change in the persons carrying on a business occurred under Section 8(1) of the Excess Profits Tax Act when a Hindu undivided family and a stranger's partnership was disrupted, and the family business was continued by a partnership of family members and the stranger. The facts revealed that prior to February 25, 1942, a partnership existed between P. Pachayappa Nadar and the Hindu undivided family of M.V. Shanmugavel Nadar Sons, which later transformed into a partnership of eight members, including the seven family members and Pachayappa Nadar. The interpretation of Section 8(1) was crucial in determining the change in persons carrying on the business. The section states that upon any change in persons, the business is deemed discontinued, and a new business is commenced. In this case, the family ceased to be a person carrying on the business after the partnership formation, leading to a clear change in the individuals involved in the business operation. A legal argument was raised suggesting that all family members should be considered as carrying on the business when the family was in partnership. However, established principles of Hindu law indicated that only members who entered into a contractual relationship with the stranger could be deemed as partners, not the entire family as a unit. The contention that other family members also entered into a partnership was dismissed as it was not raised before the Tribunal during the proceedings. The judgment referenced previous cases emphasizing that when a joint family transitions to a partnership, there is a change in ownership, and the business is then owned by the firm, not the family as a whole. The judgment highlighted that concessions made by the Excess Profits Tax Officer for one partner could not be extended to others without proper authorization. The court concluded that in the given circumstances, there was indeed a change in the persons carrying on the business as per Section 8(1) of the Excess Profits Tax Act. Overall, the judgment provided a detailed analysis of the legal principles governing changes in business ownership and the implications of partnership formations on the interpretation of tax laws, specifically focusing on the transition from a joint family business to a partnership structure.
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