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TMI Blog1943 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... h April, 1938. On the 22nd December 1939 the petitioner claimed that the income of the family from the 13th April 1938 to the 2nd June 1938 was not liable to be taxed by reason of the provisions of sub-sections (3) and (4) of Section 25. The Income-tax Officer accepted the petitioner's statement that there had been a partition, but he rejected the contention that the family was not liable to pay the tax on the profits earned between the 13th April and the 2nd June 1938. The petitioner appealed to the Appellate Assistant Commissioner who agreed with the Income-tax Officer. The petitioner then asked the Commissioner to make a reference to the Court under Section 66(2) and as the Commissioner refused to do so, the petitioner moved the Court for an order under sub-section (3) of that section directing the Commissioner to make a reference. The Court directed the Commissioner to refer for decision the following question:- "Whether the income of the family from the 13th April 1938 to the 2nd June 1938 is not liable to be taxed by virtue of Section 25(3) of the Income-tax Act?" In his statement of the case the Commissioner has suggested that the application of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said period" which are to be found therein. He points to the fact that sub-section (3) states emphatically that a business on which a tax was charged under the provisions of the Act of 1918 shall not be chargeable in respect of the income of the period between the end of the previous year and the date of discontinuance and he says that "relief" cannot be contemplated in this connection because it must be presumed that the Income-tax Officer will carry out his duties in accordance with the provisions of the Act. Besides being exempt from tax during this period the assessee is allowed to claim a refund if an amount of tax has already been paid in respect of the income of the previous year exceeding the amount payable on the basis of the income received in the year of discontinuance. He is entitled to recover the whole of the difference. It is said that it is here that a provision for relief is necessary and sub-section (5) has been inserted in order to impose a time limit. In my judgement the petitioner's contentions are sound. The Legislature could only contemplate the Income-tax Officer doing his duty and therefore would not consider it necessary to provide fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly deals with a case of cessation of business. The word "discontinued" in sub-section (3) of Section 25 cannot be given a different meaning from the meaning it has in Section 44 unless the context in sub-section (3) demands it, and I can find nothing in sub-section (3) which would warrant the Court departing from this well accepted rule of construction. On the other hand, I consider that the words "then, unless there has been a succession by virtue of which the provisions of sub-section (4) have been rendered applicable" which follow the word "discontinued" in Section 25(3) give strong indication that the word "discontinued" there means "cessation." As already pointed out, sub-section (3) has been inserted merely for the purpose of preventing double taxation. Full support for this opinion is to be found in the judgement of Scrutton, J., in Bartlett v. Inland Revenue Commissioners [1914] 3 K.B. 686; 7 Tax Cas. 229, where it was held that if the owner of a business sells it to a company, the business is not discontinued within the meaning of Section 24(3) of the Finance Act, 1907, which provides that where a profession, trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Revenue [1914] 3 K.B. 686; 7 Tax Cas. 229, M. Faraday and Others v. Carter [1927] 11 Tax Cas. 565.) They have accordingly been adopted in the Indian Income-tax Act, 1922, as denoting two different situations for which the Act makes separate provisions in Sections 25 and 26, and before the Amendment Act of 1939 was passed the Courts in this country, including the Bombay High Court had uniformly held that "discontinuance" for the purpose of Section 25 did not cover mere change of ownership. (See Commissioner of Income-tax, Bombay v. Sanjana & Co., Ltd. [1926] I.L.R. 50 Bom. 87, Kalu Mal Shori Mal v. Commissioner of Income-tax, Punjab [1929] 3 I.T.C. 341, Hanutram Bhuramal v. Commissioner of Income-tax, Bihar and Orissa [1938] 6 I.T.R. 290.) But it is argued-and the argument was accepted by the Bombay High Court in the case already referred to-that the amendments introduced in Sections 25 and 26 by the Act of 1939 now compel a different interpretation of the term in Section 25(3). It seems to me, however, with all respect, that the well-marked distinction for purposes of assessment between discontinuance and succession has not been obliterated by the recent amendments and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., charged under the Act of 1918. This provision, however would make it possible for the relief in respect of the double assessment referred to above being claimed more than once if the change of ownership occurred after 1st April 1939, once by the predecessor at the time of succession and once by the successor when the latter closes down the business in any subsequent year. This had to be provided against, as such relief has to be granted only once and that to the predecessor who suffered the double assessment, and Section 25(3) was accordingly amended so as to exclude the successor from its benefits when he discontinues the business subsequently as, so far as he is concerned, he will have suffered tax only for the exact number of years for which he has carried on the business. Hence the insertion of the words "then unless there has been a succession by virtue of which the provisions of sub-section (4) have been rendered applicable" after the word 'discontinued' in sub- section (3). The learned Judges in P.E. Polson, In re [1942] 10 I.T.R. 52, apparently thought that this exception applied only where succession and subsequent discontinuance both occurred in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (3) or sub-section (4) shall be entertained unless it is made before the expiry of one year from the date from which the business, profession or vocation was discontinued or the succession took place as the case may be." It will be seen that sub-sections (3) and (4) of Section 25, provide for two concessions in respect of a business, etc., charged under the Act of 1918, namely, (1) an exemption from tax of the income of the period between the end of the previous year and the date of the discontinuance or succession and (2) an adjustment, at the option of the assessee, of the tax levied on the income of the previous year with reference to the profits of the said period and a refund of the excess tax if any, already collected. In the present case the petition sought only concession (1). To obtain that concession the assessee does not have to call upon the Income-tax Officer to do anything. The Act exempts the income of the period in question and the Officer has merely to take note of the exemption and abstain from assessing such income; while for concession (2) the assessee has to make a 'claim' before the Officer, as it involves the Officer doing something, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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