1972 (8) TMI 8 - SC - Income Tax

Assessee takes over business of the predecessor - assessee was carrying on several other businesses which it had taken over - assessee-company was entitled to relief under section 25(3); as such, the judgment of the High Court has to be confirmed

Issues Involved:
1. Entitlement of the assessee-company to claim exemption under section 25(3) of the Income-tax Act.
2. Allowability of loss suffered on the sale of property in Shanghai as a revenue deduction.
3. Deductibility of the amount transferred to the Superannuation Fund against the income of the year.
4. Entitlement to claim a sum transferred after the liquidation of the company against the profits of the company.
5. Entitlement to set off the loss suffered in 1948 against the profit of 1949-50.

Detailed Analysis:
Issue 1: Entitlement to Claim Exemption Under Section 25(3)
The primary issue was whether the assessee-company was entitled to claim exemption under section 25(3) of the Income-tax Act. The section provides relief to a taxpayer who would otherwise be charged twice for the same year's income due to a change in the basis of assessment from the 1918 Act to the 1922 Act. The court observed that to obtain relief under section 25(3), three conditions must be satisfied:
1. The business must have been charged under the 1918 Act.
2. There must be no succession attracting sub-section (4).
3. The business must be discontinued, amounting to a complete cessation and not merely a change of ownership.

The court found that the assessee-company had indeed taken over the business of the firm, including dealing in shares and stocks, and continued it as a going concern. The High Court's assessment orders for the years 1921-22 and 1922-23 confirmed that the assessee-company was taxed on profits from dealings in shares and stocks, indicating it was trading in shares and securities. The court concluded that the assessee-company was entitled to relief under section 25(3).

Issue 2: Loss on Sale of Property in Shanghai
The second issue was whether the loss suffered on the sale of property in Shanghai was allowable as a revenue deduction. The High Court answered this question in favor of the revenue, indicating that the loss was not allowable as a revenue deduction. The Supreme Court did not delve into this issue further as the assessee did not press this point in the appeal.

Issue 3: Deduction of Amount Transferred to Superannuation Fund
The third issue was whether the assessee-company was entitled to deduct the amount transferred to the Superannuation Fund against the income of the year. The High Court answered this question in favor of the assessee, allowing the deduction. The Supreme Court did not address this issue separately, implying agreement with the High Court's decision.

Issue 4: Claim of Sum Transferred After Liquidation
The fourth issue was whether the assessee-company was entitled to claim a sum transferred after the liquidation of the company against the profits of the company. The High Court ruled in favor of the assessee, allowing the claim. The Supreme Court did not provide a separate analysis, indicating concurrence with the High Court's judgment.

Issue 5: Set Off of Loss Suffered in 1948 Against Profit of 1949-50
The fifth issue was whether the assessee-company was entitled to set off the loss suffered in 1948 against the profit of 1949-50. The High Court ruled in favor of the assessee, permitting the set-off. The Supreme Court did not discuss this issue in detail, suggesting agreement with the High Court's decision.

Conclusion
The Supreme Court upheld the High Court's judgment, confirming that the assessee-company was entitled to relief under section 25(3) of the Income-tax Act and allowing the deductions and claims as ruled by the High Court. The appeals were dismissed with costs.

← Previous Next →