Law:

Section:

Section 170 of the Income-tax Act, 1961 [Corresponding to section 26(2), read with section 25(4) of the Indian Income-tax Act, 1922] - Succession to business other than on death - Assessment year 1940-41 - Whether if business was charged under Indian Income-tax Act, 1918, and person succeeded is exempt from tax under section 25(4) of 1922 Act, he would not be charged in respect of profits of period from end of previous year up to date of succession, while person succeeding would be liable under sub-section (2) of section 26 of 1922 Act in respect of profits earned by him after date of succession - Held, yes - Whether ITO is not empowered to make an accelerated assessment in year in which succession occurs on profits of that year, and prematurely assess person succeeding to a business so that he may be able to give relief to person succeeded - Held, yes - Whether ex-person "end of previous year" in sub-sections (3) and (4) of section 25 in context of those sub-sections means end of an accounting year (a period of full 12 months) expiring immediately preceding date of of discontinuance or succession - Held, yes - Whether assessee in case of discontinuance or succession would be entitled to claim exemption from payment of tax for broken period and also claim that income, profits or gains of previous year, i.e., year preceding broken period, should be treated as income, profits or gains of broken period - Held, yes FACTS The respondents, who were brothers, had been carrying on in partnership the business of a daily newspaper. In respect of the profits of the year of account ending 30-6-1938, assessment was made in the year 1939-40 and the firm was charged to income-tax for that assessment year. On 1-3-1940, the assessees transferred their business as a going concern to a private limited company called "K". For the assessment year 1940-41 the assessees claimed that the firm was not liable to pay any income-tax on the income of its business from the end of the accounting year ending 30-6-1938 to 29-2-1940, the date on which the limited company succeeded to the business of the firm (i.e., for a period of 20 months) under section 25(4) of 1922 Act, as it had been…

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