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Issues Involved:
1. Whether there was a change in the persons carrying on the business within the meaning of Section 8(1) of the Excess Profits Tax Act, 1940, when the business transitioned from being carried on by a partnership between two Dayabhaga Hindu undivided families to a partnership between the separated male members of those families. 2. Whether the assessee firm was entitled to carry forward the deficiency of profits that occurred prior to the 14th April, 1943, to set it off against the profits of the subsequent chargeable accounting periods. Issue-wise Detailed Analysis: 1. Change in Persons Carrying on the Business: The core issue was whether the transition in the partnership's structure constituted a "change in the persons carrying on the business" under Section 8(1) of the Excess Profits Tax Act. Initially, the business was managed by a partnership between two Hindu undivided families (HUFs) governed by the Dayabhaga School of Hindu law. On 14th April 1943, these families experienced disruption, and the business was subsequently carried on by a partnership of the separated male members of these families. The Tribunal's findings established that prior to 14th April 1943, the business was run by two HUFs, each considered a "person" under the Excess Profits Tax Act. Post-disruption, the business was managed by eight individuals who were members of the previously undivided families. The court ruled that a Hindu undivided family is an entirely different entity from the individuals composing it. Therefore, the transition from a partnership of two HUFs to a partnership of eight individuals constituted a change in the persons carrying on the business. The court emphasized that under Section 8(1), if a change occurs, the business is deemed to have been discontinued and a new business commenced, regardless of whether this change resulted in an actual discontinuation of the business. 2. Carry Forward of Deficiency of Profits: The assessee firm sought to carry forward a deficiency of profits amounting to Rs. 84,388, which occurred before 14th April 1943, to set it off against profits from subsequent periods. The Excess Profits Tax Officer disallowed this claim, arguing that since the business had transitioned to a new business carried on by individual members forming a new partnership, the deficiency could not be carried forward. This decision was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. The court upheld the Tribunal's decision, stating that the change in the business's structure meant that the privilege of carrying forward the deficiency ceased to be available. The court referenced Section 7 of the Excess Profits Tax Act, which allows for the carrying forward of deficiencies, but noted that Section 8(1) overrides this provision if there is a change in the persons carrying on the business. Additional Considerations: The court dismissed the assessee's attempt to argue that the business was always carried on by individual members rather than the HUFs before 14th April 1943. The court noted that this argument was raised late and was not supported by the Tribunal's findings. The court also referenced several precedents under the Income-tax Act, which supported the principle that a change from a family or families to individual members constitutes a succession of one person by another, thereby aligning with the interpretation under Section 8(1) of the Excess Profits Tax Act. Conclusion: The court concluded that the business experienced a change in the persons carrying on the business from 14th April 1943, and thus, the assessee firm was not entitled to carry forward the deficiency of profits from the period before this date. The judgment was delivered in favor of the Commissioner of Excess Profits Tax, West Bengal, who was also awarded the costs of the reference.
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