Law:

Section:

Section 7, read with Section 8 of the Excess Profits-tax Act, 1940 - Deficiency in Profits - Carry forward and set off of - Whether there is any change in person carrying on a business within meaning of section 8(1), when business which was previously carried on and owned by an HUF is on disruption of family carried on and owned by a partnership composed of members of quondam family - Held, yes - Whether in such circumstances, succeeding partnership would not be entitled to claim set off of deficiencies of profits of chargeable accounting periods when business was owned by HUF - Held, yes FACTS One K and his brother C alongwith their sons constituted an HUF and assessed to excess profit-tax as an HUF. On 29-9-1942, there was a disruption in the family and B and P representing the two branches of K and C entered into a partnership. The joint family broke up into two parts P and his sons remaining joint as one unit and K's two sons and their descendants forming the other unit. The partnership thus became a partnership between B as kartarepresenting his branch and P as karta representing his branch. The profits made by this joint Hindu family during the year immediately previous to the partition were below the standard profits and the question arose whether this deficiency could be carried forward and could be set-off against the profits made by the partnership. The Tribunal held that there had been a change in the personnel, that the case was covered by section 8(1) and that the deficiency in the previous year could not be set-off against the profits of the assessment year. On reference : HELD Under the Act, if an HUF is carrying on business and has made profits, exceeding the standard profits, the EPTO is entitled to realise the tax made from the assets of the business and, therefore, the liability of the members of the HUF - Whether minor or majors and whether they were kartas or as adult members of the joint family carrying on the business or were merely sleeping members, if one may use the term of the HUF is the same. Under the general law, however, the karta or such other adult members who were carrying on the business are not only liable to the extent of…

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