9911796707
TMI Blog1953 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1944-45 the previous year was the Diwali year ending with Kartic Badi 15, 2000, corresponding to the period 8th November, 1942, to 27th October, 1943. The firm carried on business in grain, cloth and lac. The business in grain, cloth and lac carried on by the firm was assessed to tax under the Indian Income-tax Act, 1918 (Act VII of 1918). The partners of the assessee firm were (1) Inderchand Kejriwal (representing the Hindu undivided family of Kaniram Ganpatrai) (2) Mahadeolal Jwalaprasad (representing the Hindu undivided family of the same name). These partners shared the profits and losses of the firm in the ratio of 10:6. There was a disruption of the Hindu undivided family of Mahadeolal Jwalaprasad in 1941. The exact date of the disruption is not ascertainable from the records. On the disruption of the family, the individual members of the family viz., Mahadeolal and Jwalaprasad became partners of the firm in place of the Hindu undivided family of Mahadeolal Jwalaprasad and were entitled collectively to six annas one rupee share in the profits of the firm. Inderchand Kejriwal was the capitalist partner. He entered into a partnership with Ramniranjan Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; had been taken over by the new firm with the stock-intrade, there was no discontinuance of the business. In regard to the alternative claim under Section 25 (4) of the Act, the Tribunal held that "as Inderchand is continuing to be a partner of the old as well as the new partnership, there was no succession." A copy of the Tribunal's order is Annexure 'B' and forms part of the case. Another contention raised before the Tribunal was that partner Mahadeolal Jwalaprasad was entitled to relief under Section 25 (3) of the Act, as he discontinued the business on 27th October, 1943. The Tribunal negatived this contention in the following words : " As we find that this partner ceased to be a partner in 1941 itself as a result of the division of his family, we are unable to consider his claim for discontinuance within the meaning of Section 25 (3) during the relevant assessment year, as there was no such partner in that year." There is no dispute between the parties as to the nature of the relief to be given if it is eventually held that relief is due under Sections 25 (3) and 25 (4) of the Income-tax Act. It is admitted that the relief due would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922. It was claimed that relief ought to be granted under Section 25(3) as the assessee firm had discontinued its business with effect from 28th October, 1943. It was contended in the alternative that if it should be held by the Income-tax department that business had not been discontinued, relief should be given under Section 25(4) as there was succession to the business carried on by the assessee. The Income-tax Officer rejected the claim for relief either under Section 25 (3) or Section 25(4). An appeal was preferred on behalf of the assessee to the Appellate Assistant Commissioner but the appeal was dismissed. The assessee further appealed to the Income-tax Appellate Tribunal contending that there was either discontinuance of business under Section 25(3) or there was succession under Section 25(4) and in either case the assessee was entitled to claim relief. The Appellate Tribunal held that in view of the fact that "all the live accounts" had been taken over by the new firm with the stock-in-trade there was no discontinuance of the business. As regards the alternative claim under Section 25(4) of the Act the Tribunal said:-"As Inderchand is continuing to be a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership of the business". In my opinion the Appellate Tribunal has proceeded on a misconception of law in holding that there was no succession to the firm of Kaniram Ganpatrai. It is true that Inderchand Kejriwal was a partner of the old firm and was also a partner of the new firm. But that is not a material consideration in deciding whether there was succession within the meaning of Section 25(4). In the present case there are circumstances which suggest that the old firm of Kaniram Ganpatrai had dissolved with effect from 27th October, 1943. The Appellate Assistant Commissioner has stated that Mahadeo Lal Jwalaprasad retired from partnership on this date and the whole business came into the hands of Inderchand. The Appellate Tribunal has affirmed this finding and further stated that most of the assets and liabilities were transferred to the new firm of Kaniram Jankidas who carried on the business of grain, cloth and lac as before without a break. These facts suggest the inference that the old partnership of Kaniram Ganpatrai had been dissolved by agreement. Under Section 40 of the Partnership Act a partnership may be dissolved by the agreement of the partners. It is not nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversing the decision of the Court of Appeal that though in the English law a partnership was not a single juristic person, the scheme of the income-tax legislation treated the partnership as a legal entity for the purpose of assessing revenue and there was succession to the business within the meaning of Rule 9, sub-rules 1 and 2. Applying the principle of these authorities it is clear that in the present case there has been a succession to the partnership within the meaning of Section 25(4) of the Indian Income-tax Act and that the finding of the Appellate Tribunal on this point is erroneous and should be overruled. The argument was stressed on behalf of the Income-tax department that all the assets and liabilities of Kaniram Ganpatrai were not taken over by the new firm of Kaniram Jankidas. It was pointed out by the Standing Counsel that assets of the defunct cloth business to the extent of ₹ 3,09,878 and assets of the existing shops to the extent of ₹ 4,90,737 were not taken over by the new partnership. But the Appellate Tribunal has found that the major portion of the assets and liabilities were taken over by the new firm and the business at Daltonganj and several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs relating to that year. But the argument of the Standing Counsel must be rejected on two grounds. In the first place, the question was not raised on behalf of the Income- tax department before the Appellate Tribunal and no statement of the case has been made thereon. It is established by a long line of authorities that the High Court is competent only to decide the question of law raised in the statement of the case. It is important to remember that the jurisdiction with which the High Court is invested under the Income-tax Act is of an exceptional character and in hearing the reference the High Court has seisin only of such questions of law as have been properly raised before the Appellate Tribunal and upon which there is statement of the case (Chatturam Horilram Ltd., In re [1951] 19 I.T.R. 600). In the second place, the argument of the Standing Counsel must be rejected on the ground that the date of succession fell in the Diwali year ending Kartik Badi 15, 2000 Samvat. On reference to the almanac it appears that Kartik Badi 15 of 2000 Samvat corresponded to either 28th October, 1943, or 29th October, 1943, and Kartik Sudi 1,2000 Samvat corresponded to 30th October, 1943. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But it seems to me for the reasons I have already given that if it was a question of fact for the Commissioners in this case they have deliberately not decided it. They have presented to us a problem of law, and they have given us the benefit of their opinion upon it, and if we do not agree with that we are entitled to say so. In my view if this is a finding as I think it must be, of law that there is no succession within the meaning of the Rule, I find myself unable to agree with it for the reasons I have given". In the present case the conclusion of the Income-tax Appellate Tribunal is also vitiated since they have misdirected themselves in law. The Appellate Tribunal has inferred that there was no succession "as Inderchand was continuing to be a partner of the old as well as the new partnership and Section 25(4) contemplated a complete change of personnel and not a mere change of ownership of the business". As I have already said, the fact that Inderchand continued to be a partner of the old as well as the new partnership has no relevance to the question whether there was a succession to the old partnership. It is manifest that in finding that there was no succes ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
