1966 (11) TMI 17 - HC - Income Tax

Same business - crushing and manufacture of oil was a totally different business from dealing in grain and oil seeds and the assessee is not entitled to relief u/s 25(4) of Indian Income Tax Act, 1922

Summary

Issues:
Interpretation of section 25(4) of the Income-tax Act, 1922 regarding the continuity of business for tax relief.

Analysis:
The case involved a consolidated matter under section 66(2) of the Income-tax Act, 1922, for assessment years 1950-51 and 1951-52. The primary issue was whether the business carried on by the assessee at the time of claiming relief under section 25(4) was the same business on which tax under the Act of 1918 was paid. The assessee, a registered firm, succeeded a Hindu undivided family business dealing in grains and oil seeds, which was initially taxed under the 1918 Act. The firm continued the business under the same name and style. The dispute arose when the Commissioner of Income-tax challenged the Income-tax Officer's decision to allow relief under section 25(4) to the assessee, arguing that the business of oil mills acquired by the assessee was not part of the original taxed business. The Tribunal concluded that the manufacturing of oil was distinct from the trading of oil seeds, rejecting the assessee's claim that the oil mills were an extension of the original business.

The court emphasized the requirement of identity between the business taxed under the 1918 Act and the succeeding business for relief under section 25(4). The court rejected the argument that dealing in oil seeds was the same business as manufacturing oil, highlighting the fundamental differences between trading and manufacturing activities. It clarified that a trader in oil seeds is not involved in manufacturing, whereas a manufacturer transforms raw materials into finished products. The court upheld the Tribunal's finding that the business taxed under the 1918 Act was not the same business succeeded to in 1950, affirming that trading and manufacturing are distinct activities.

In conclusion, the court ruled against the assessee, stating that the Tribunal's decision was not flawed and that the business continuity required for relief under section 25(4) was not established in this case. The assessee was directed to pay the costs of the reference, along with assessed fees. The judgment underscores the importance of maintaining the identity of the business for tax relief purposes under the Income-tax Act, 1922, and clarifies the distinction between trading and manufacturing activities in determining business continuity for tax assessment.