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, 1961] - Succession to business other than on death CASES REFERRED TO Drummond v. Collins [1915] AC 1011; Astor v. Perry [1935] AC 399 JUDGMENT Satyanarayana Rao, J-This reference raises a question of the correct interpretation of the expression "the period between the end of the previous year and the date of such succession" occurring in Section 25(4) of the Indian Income-tax Act. The question formulated by the Appellate Tribunal and referred to us under Section 66(1) of the Act is in these terms:- "Whether on the facts of this case the Appellate Tribunal was right in holding that the period the profits of which were entitled to exemption from the payment of the tax under Section 25(4) of the Indian Income-tax Act, 1939, was the period commencing from 1st July, 1938, and ending with 29th February, 1940?" In short, the dispute is whether the "previous year" referred to in the sub-section should be taken as the year ending on 30th June, 1938, or 30th June, 1939. The assessee contends that it is the former, while the Income-tax Commissioner maintains that it is the latter. There is no decided case on the point and the question has to be settled by an interpretation of the relevant provisions of the Act. The relevant facts are not in controversy and lie in a short compass. The assessee is the registered firm of Messrs. K. Srinivasan and K. Gopalan, Proprietors of "The Hindu" a daily newspaper at Madras. They were last assessed to tax in the year 1939-40 in respect of the profits of the "previous year", the accounting year from 1st July, 1937, to 30th June, 1938. On 1st March, 1940, i.e., during the assessment year 1939-40, the assessee made over the newspaper business as a going concern to a private limited company incorporated under the Indian Companies Act, 1913, and styled Messrs. Kasturi and Sons Ltd. The Company succeeded to the business of the firm on 1st March, 1940. When required by notice under Section 22(2) of the Indian Income-tax Act to submit a return of its income for the assessment year 1940-41, the assessee claimed that the…

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