Law:

Section:

Section 10A of the Excess Profits-tax Act, 1940 - Avoidance or reduction of tax liability - Assessment years 1944-45 to 1947-48 - Assessee firm carried on kirana business with headquarters at Lucknow and a branch at Kanpur - Later another firm was started at Kanpur to carry on same kirana business and in this firm besides three partners of assessee two other persons joined as partners - In relevant assessment years profits earned by said new firm were added to profits earned by assessee firm under section 10A on ground that transaction of starting new firm had been entered into by assessee with main purpose of avoiding or reducing excess profits tax liability - Tribunal upheld action of ITO - Whether instant case raised no question of law on which a statement of case could be called for from Tribunal - Held, yes FACTS The assessee, firm, carried on kirana business with headquarters at Lucknow and a branch at Kanpur. In this firm 'J' had a one-third share, 'SC' and 'S' a one-third share and 'K' minor had a one-third share. On 17th December, 1942, another firm under the name and style of 'JLK' was started at Kanpur to carry on the same kirana business and, in this firm, the three partners of the assessee firm each had a four-anna share. In addition, two other persons, 'T' and 'A' entered as partners and they each had a two-anna share. In the assessment years 1944-45, 1945-46,1946-47 and 1947-48. the profits earned by this new firm were added to the profits earned by the assessee firm by the EPTO under section 10-A on the ground that the transaction of starting this new firm had been entered into by the assessee firm with the main purpose of avoiding or reducing excess profits tax liability of the assessee firm. The Tribunal rejected the case of the assessee observing : 1. That the partners of the assessee firm held a twelve-anna share in the newly constituted firm and financed that firm to the extent of providing a capital of Rs. 29,500 while the other two partners, 'T' and 'A', only invested Rs. 7,250. The financing of the new firm by the partners of the assessee firm was out of the finances of the assessee firm. 2. That the business of the newly constituted…

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