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TMI Blog1945 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... mily was assessed as undivided but in the course of the assessment for the year 1941-42 the family submitted an application under Section25-A of the Act and claimed that a partition had taken place among the members of the family and all the joint property divided between the father and the sons on 25th March, 1941. The deed of partition is dated 17th April, 1941, but it refers to the date of partition as 25th March, 1941. According to the deed of partition, the business of guarantee brokers was allotted to Sardar Partap Singh, that of flea seed husk to Sardar Lachman Singh and that of grocery and yarn to Sardar Bahadur Singh. Of these businesses, that of grocery and yarn which fell to the share of Sardar Bahadur Singh was an old business on which tax had been charged under the Indian Income-tax Act, 1918. The Income-tax Officer after the necessary enquiry recorded an order under sub-section (1) of Section 25.A recognising that the family had partitioned its property on 25th March, 1941, and made assessment on the members of the family under sab-section (2) of Section 25-A. The family claimed that since the business of grocery and yarn had been assessed to income-tax under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In order to appreciate this contention it is necessary to refer to the relevant provisions of Sections 25, 25-A and 26 of the Act which are as follows:- "25 (1) Where any business, profession or vocation to which sub-section (3) is not applicable is discontinued in any year, an assessment may be made in that year on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance in addition to the assessment, if any, made on the basis of the income, profits or gains of the previous year. (3)Where any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918, is discontinued, then, unless there has been a succession by virtue of which the provisions of sub-section (4) have been render ed applicable, no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinuance, and the assessee may further claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period. Where any such claim is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers or groups of members in definite portions he shall record an order to that effect: Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family. (2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members shall, in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in sub-section (1) of Section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Income-tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of Section 23 : Provided that all the members and groups of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the business was carried on after the expiry of the previous year, or such period and the previous year if not already assessed, though in the latter case the income for each of these periods has to be separately assessed by the same order (sub-section 1). (2)It may be that the business that has been discontinued in a particular year was a business on which tax was charged under the Act of 1918. In such a case the section provides that tax shall not be pay able in respect of the income, profits and gains of the period for which the business was carried on after the end of the previous year. The section further provides that in such a case the assessee may claim that the income of the previous year shall be deemed to have been the in come of the period for which the business was carried on after the end of the previous year. Where the assessee makes such a claim, the income of the period for which the business was carried on after the end of the previous year shall be assessed and if the tax payable on it is less than the tax paid or payable on the income of the previous year the excess shall be refunded or allowed, as the case may be, to the assessee (sub-section 3). (3)I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer finds or it is alleged before him that the family which was in the past assessed as an undivided Hindu family exists no longer, having partitioned its property or that the business, profession or vocation hit her to carried on by a Hindu undivided family has passed on to someone else and the family has also disrupted and partitioned its property after the assignment of the business. The section provides that in such a case the income of the family during the period that it carried on the business as an undivided family shall be assessed, and the tax payable on it levied on the members or groups of the family according to the portion of the joint family allotted to them. Thus the subject-matter of this section is wholly different from the subject-matter of the preceding section and each of these sections deals with an entirely different set of circumstances. There is no inconsistency, repugnancy or contrariety between them nor do they overlap each other. Each deals with a different position and enacts a different rule. As pointed out in Ram Rakha Mal & Sons Ltd. v. Commissioner of Income-tax, Punjab [1937] 5 ITR 137 ; ILR 18 Lah. 325, each section in the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Income-tax Officer will have to proceed under sub-section (2) of Section 26. The assessee under Section 25-A is the members or groups of the quondam undivided Hindu family whereas under sub-section (2) of Section 26 the assessee is the family itself because ex hypothesi the family exists though one of its assets, namely, the family business, has been transferred. It seems to me, therefore, that there is really no conflict between sub-section (2) of Section 26 and sub-section (2) of Section 25-A and that the former deals with those residuary cases where the family has not partitioned its entire property though its business has been transferred to someone else. The assessee under sub-section (2) of Section 26 is the undivided family in respect of the income earned by it from such business whereas under sub-section (2) of Section 25-A, the assessee is the members of the quondam Hindu undivided family. There is thus no conflict between these two sub-sections each of which provides for an entirely different position. It is admitted that if the case be covered by sub-section (2) of Section 26, the family would be entitled to the relief claimed. It is further admitted that, so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25, however, the assessee may not be the person who has transferred the business. The right to relief under this subsection vests only in the person who has been succeeded in the busi-nesss who may not necessarily be the assessee. For instance, in this very case, the assessment being under sub-section (2) of Section 25-A, the assessees are the persons who constituted the undivided family, but the right to relief vests in the undivided family whose income has to be assessed under that sub-section. The use of the word "assessee" in this sub-section would clearly have been incorrect, and, if that word had been used the sub-section would not have applied to cases where the person transferring the business was not the assessee. This difference, therefore, in the language of sub-sections (3) and (4) is, in my opinion, intentional and cannot lead to the inference that the right to relief can only be claimed by an assessee and that where an undivided Hindu family ceases to exist as such after disruption and partition of its assets, the sub-section ceases to be applicable. In my opinion, it is impossible to find any reason to exclude a quondam Hindu undivided family from the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the provision of law newly introduced in 1939 in sub-section (2) of Section 25-A as regards succession to a business carried on by a Hindu undivided family. The reply to this question depends upon the true construction to be put upon sub-section (2) of Section 25-A in the light of the other provisions of the statute that are closely connected with it. Prior to the amendment of 1939 Section 25 was headed "Assessment in case of discontinued business" and Section 25-A "Assessment after partition of a Hindu undivided family." After the amendment, although the headings of both these sections were left intact, their subject matter was extended beyond their scope. Sub-section (4) was added to Section 25 despite the fact that it dealt with succession to a business profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918 (VII of 1918), and sub-section (2) of Section 25-A was so amended as to include the case of a person who "has succeded to a business, profession or vocation formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last day on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on deals only with the matters specified therein and goes no further, and (b) each section completely covers the matter with which it deals." Thirdly, if effect is given to the interpretation suggested on behalf of the Commissioner of Income-tax, grave in justice will result inasmuch as without any rhyme or reason a Hindu undivided family otherwise entitled to the benefit of sub-section (4) of Section 25 will at once be deprived of it. Sitting as a Court of law we should always guard against all inequitable consequences and put such construction on the statute as to avoid them. Interpreted in this manner, the new provision of law introduced in sub-section (2) of Section 25-A will not debar the assessee from claiming the benefit of sub-section (4) of Section 25. I would accordingly answer the question propounded by the Tribunal in the negative and grant the family its costs. Mehr Chand Mahajan, J.-In my opinion the question, "whether on the facts of the case, the application of Section 25-A(2) is a bar to the assessee's claim either under Section 25(4) or Section 25(3)," should be answered in the negative. Shortly stated my reasons in support of the answer are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pting an undivided Hindu family in whose case it somehow considered that the advance tax paid by it on its business in the year 1922 should be forfeited. Further, I think that Section 25-A and Section 26(2) are not mutually exclusive. As observed by their Lordships of the Privy Council in Commissioner of Income-tax v. Polson [1945] 13 ITR 384 ; 49 CWN 786, Section 26 is primarily directed not to the circumstances in which relief for taxation is given but to the apportionment of tax where relief is not given. This section, therefore, does not in any way affect the contention of the assessee. As the undivided Hindu family is deemed to continue for the purposes of assessment, in making the assessment under Section 25-A, relief under Section 25(4) can properly be given. This relief was rightly allowed by the Tribunal in this case as the business of the joint family was assessed to tax under the Income-tax Act of 1918 and there being a succession to the business, the joint family was entitled to the benefit of the relief conferred by Section 25(4) of the Act of 1922. The undivided family stands on the same footing as any other taxable unit. In my judgment there is no inconsistency, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Hindu family business started after 1918 too does not involve complexity. Suppose a joint Hindu family is paritioned in a certain year, then under the provisions of Section 25-A the business will be taxed up to the date of its discontinuance and the tax will be recovered from various members. The family will be assumed to continue as joint for the purpose of assessment only. Now, consider the case of a business started before 1918. Suppose in a certain year X the business is discontinued. In this year an assessment for the previous year, that is, for the year X-1 will be made. Another assessment will be made for the broken period of the year X, that is, from the end of the year X-1 up to the date of discontinuance. Under the provisions of Section 25(4) no tax is payable in respect of the broken period in the year X. Section 25(4) further provides that if this tax of the broken period in the year X is less than the tax in the year X-1, the firm will be allowed a rebate. The case of a joint family business is to be treated in the same way. If the business is discontinued in the year X the same method of assessment will apply and relief will be given under Section 25(4). Now, suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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