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TMI Blog1961 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 66(2) of the Income-tax Act, 1922, to the High Court of Judicature, Madras. The assessee in the two cases thus referred is the same but the points referred are different and the accounting years are also not the same. The assessee is V. N. M. Arunachala Nadar. In Reference No. 68 of 1953 the question referred to the High Court was under section 8(1) of the Excess Profits Tax Act. This question has been thus stated : " Whether on the facts and circumstances of the case there was a change in the persons carrying on the business within the meaning of section 8(1) of the Excess Profits Tax Act ? " The chargeable accounting periods in respect of which this question was framed are four, February 7, 1943 to February 6, 1944, February 7, 1944, to January 18, 1945, January 19, 1945, to February 3, 1946, and February 4, 1946, to March 31, 1946. It is in respect of these four accounting periods that the four Civil Appeals Nos. 541 to 544 of 1960 arose from Reference No. 68 of 1953. In Reference No. 58 of 1953 the question referred is one under section 10A of the Excess Profits Tax Act. It has been thus framed : " Whether on the facts and in the circumstances of the case ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the close of the accounting year. For the purpose of the partition the members of the family were divided into two groups--the four adult sons constituted one group though they were later divided inter se and the appellant and his undivided sons constituted another group. The properties of the family were divided into two halves each group taking one half. It appears that the appellant's group took over the business at Virudhunagar and at Madurai and the adult sons took over the business at Tuticorin and at Bombay. This partition was effected in the presence of and as determined by Mr. C. S. Subbiah Nadar of Virudhunagar. Subsequently a document was executed on August 10, 1942 which recorded the partition as it had already taken place. Later on, three of the adult sons of the appellant, Ayyamperumal, Rathinasabapathy and Durairaja commenced separate business under the name and style of V. N. M. A. Ayyamperumal Nadar Bros. This business was started on January 28, 1942. On the same day the fourth adult son Rajamanickam also commenced a separate business of his own. The appellant likewise started with a fresh set of accounts the business that had been allotted to him an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en we deal with Civil Appeal No. 540 of 1960. It is in the light of these facts that the High Court had to determine the question referred to it in Reference No. 68 of 1953. The High Court has found that the partition effected in the family of the appellant did not show that only the adult coparceners exercised their right to become divided in status from the other members of the family, took their share and left the family. A partition under Hindu law can be partial either as to persons or as to properties ; but the High Court took the view that in fact a complete partition had taken place though after the said partition the appellant and his minor sons again continued as if they were an undivided Hindu family. " Factually, did the Hindu undivided family continue its existence after 27th January, 1942 for purpose of assessment of income-tax ", said the High Court, " is the real question for determination ". How this family came into existence it was not necessary to enquire or decide. Whether such a family came into existence in point of fact is the only point which called for its decision. Dealing with the question from this point of view the High Court referred to the facts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed minor coparcener could be made by his father or mother as his guardian ; but, as according to Mayne it would be open to the father or mother as his guardian to effect a separation on behalf of the minor coparcener, it would be equally open to the father or mother as his guardian to agree to a reunion on behalf of the minor. However, we do not propose to Pursue this matter any further because for the decision of the present appeals it is unnecessary to decide this question. Returning to the argument urged by Mr. Sastri about the character of the partition effected in the family of the appellant it may be conceded that there are some features of this partition which indicate that the adult coparceners may have left the family after obtaining their shares from their father. It is true that even in the case of such a partial partition for determining the shares of the seceding coparceners the shares of all the coparceners have to be determined as a preliminary step so that the determination of all the shares is not decisive one way or the other ; but as the High Court has pointed out it is really not necessary to consider the academic question under the Hindu law in the present p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not open to challenge in reference proceedings under section 66(2). We may, however, very briefly indicate that the facts found in the statement cannot be said to rest on no evidence at all ; in fact there is ample evidence to support the statement of the case on the material points. The partition deed which was executed on August 10, 1942, merely records a past event which had already taken place. It is common ground that in point of fact the partition was effected in the presence of and was determined by Mr. Subbiah Nadar. The partition deed in terms refers to the division of businesses and the movable and immovable properties of the family. It is styled as a partition release deed and it is executed by the four adult sons of the appellant who took their shares. When we turn to the statements made by the parties, however, it appears clear that the family business was stopped at the time of division and fresh business was commenced by the respective parties. The appellant himself had expressly stated that he stopped the family business and divided all the movable and immovable properties on the same day from the accounts between the two groups. Ayyamperumal makes an equally c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were substantially in similar terms. On these facts the appellant claimed deduction of previous losses but his claim was rejected by the departmental authorities on the ground that the two partnerships in question were brought about for the main purpose of avoidance or reduction of liability to excess profits tax. It is in respect of this conclusion that the question under reference had been framed. In answering the question against the appellant the High Court has observed that in deciding such a question some important considerations must be borne in mind. Four such considerations have been set out in the judgment of the High Court ; first, that the mere fact that a new business was started at a time when by such starting there would be a reduction of liability is not by itself proof that it was started with the main object of avoiding the excess profits liability within the meaning of section 10A ; second, the onus of proof was on the department to show that the main purpose was to avoid the payment of tax ; third, the relationship between the parties to the transaction is not by itself conclusive to prove that the motive was the avoidance of liability ; and fourth, that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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