1945 (12) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Whether there was succession by Sardar Bahadur Singh to the kariana and yarn business, or the business was split up between Sardar Bahadur Singh and Sardar Lachman Singh so as to constitute discontinuance of the old business.
2. Whether the application of Section 25-A(2) is a bar to the assessee's claim either under Section 25(4) or Section 25(3).

Issue-wise Detailed Analysis:

Issue 1: Succession or Discontinuance
The High Court examined whether there was a succession by Sardar Bahadur Singh to the grocery and yarn business or if the business was split up, constituting discontinuance. The Tribunal had previously held that there was a succession within the meaning of sub-section (4) of Section 25 of the Indian Income-tax Act. The High Court upheld this view, stating that the business was succeeded by Sardar Bahadur Singh and not discontinued, thus entitling the family to the benefit of sub-section (4) of Section 25.

Issue 2: Application of Section 25-A(2) as a Bar
The main question was whether the application of Section 25-A(2) barred the assessee's claim under Section 25(4) or Section 25(3). The High Court analyzed the relevant provisions of Sections 25, 25-A, and 26 of the Act. Section 25 deals with the assessment in case of discontinued business, providing relief from double taxation for businesses taxed under the 1918 Act. Section 25-A addresses the assessment after the partition of a Hindu undivided family, ensuring that the family is assessed as if no partition had occurred.

The Court noted that Section 25-A and Section 25 deal with entirely different situations and do not overlap. Section 25-A(2) does not bar the application of Section 25(4) because each section addresses different circumstances. The Court emphasized that the provisions of Section 25-A(2) should not be interpreted to negate the relief provided under Section 25(4).

The Court also referenced the case of Ram Rakha Mal & Sons Ltd. v. Commissioner of Income-tax, Punjab, to support the view that each section in the Income-tax Act deals with specific matters and does not extend beyond its scope. The Court concluded that there is no inconsistency or conflict between Section 25(4) and Section 25-A(2).

The Court further clarified that the right to relief under Section 25(4) is not negated by the partition of the family. The family, although partitioned, is deemed to continue as an undivided family for the purpose of assessment under Section 25-A(2). Therefore, the family is entitled to the relief provided under Section 25(4).

Separate Judgments:
- Muhammad Munir, J.: Held that the family is entitled to relief under Section 25(4) despite the application of Section 25-A(2). The family will have its costs of the reference.
- Sale, J.: Agreed with Munir, J.
- Din Mohammad, J.: Emphasized that the new provision in Section 25-A(2) does not conflict with the relief provided under Section 25(4). Answered the question in the negative and granted the family its costs.
- Mehr Chand Mahajan, J.: Stated that Section 25-A(2) does not conflict with Section 25(4) and that the family is entitled to relief. Answered the question in the negative.
- Khosla, J.: Concluded that there is no repugnancy between Section 25-A and Section 25(4). Answered the question in the negative.

The comprehensive analysis of the judgment reveals that the High Court unanimously held that the application of Section 25-A(2) does not bar the assessee's claim under Section 25(4) or Section 25(3), and the family is entitled to the relief provided under Section 25(4).