Law:

Section:

Section 25(4) of the Indian Income-Tax Act, 1922 [without any corresponding provision in the 1961 act] - Assessment - In Case of Succession to Business - Assessee-HUF having income from business had been paying income-tax under the Indian income-tax act, 1918 - 31-3-1943, there was complete partition of family properties including business - Adult male members of family formed partnership firm very next day on 1-4-1943 to carry on family business - Whether assessee entitled to exemption from tax in respect of income of period 1-4-1942 to 31-3-1943 under section 25(4) on the ground that it had been an assessee under the 1918 act also - Held, on facts, yes FACTS The assessee-HUF, carrying on business in cement, tiles, marbles, etc, had been an assessee under the Indian Income-tax Act, 1918, before the enactment of the 1922 Act. On 31-3-1943 there was a complete partition of family's movable and immovable properties. The partition deed provided, inter alia, that the coparceners had dissolved the family business on 31-3-1943 after taking their shares. The very next day, i.e., on 1-4-1943, the erstwhile adult male members of the family formed a partnership firm to carry on the family's business with equal shares. For the assessment year 1943-44, the assessee-HUF filed an application under section 25(3)/25(4) of the 1922 Act, as amended in 1939, claiming refund of the entire amount of income-tax and surcharge paid by it for the period 1-4-1942 to 31-3-1943, on the ground that it had been assessed under the Indian Income-tax Act, 1918, in the past and that the business carried on by it had been taken over by the partnership firm on 1-4-1943. The ITO, however, rejected the claim. On appeal, the AAC found that the firm had taken over the family business as a going concern and as such there was a succession under section 25(4). He, accordingly, allowed the assessee's claim. On further appeal by the revenue, the Tribunal reversed the AAC's order and also refused to entertain the claim under section 25(3) (relating to discontinuance of business), observing that the matter had all along proceeded on the footing that it was section 25(4) (relating to succession) that was…

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