Law:

Section:

I. Section 8 of the Excess profits Tax Act, 1940, read with section 25A of the Indian Income-tax Act, 1922 - Change in persons - Appellant assessee was karta of HUF consisted of himself, his four major sons and six minor sons - Major sons separated from family, and subsequently divided inter se - Partition was recorded - Assets and liabilities of business were divided into two halves, each group taking one half - Appellant started with fresh set of accounts business that had been allotted to him and his minor sons - Whether, on facts, it could be said that there was change in persons carrying on business within meaning of section 8(i) of 1940 Act - Held, yes II. Section 10A of the Excess Profits Tax Act, 1940 - Liability to tax - Avoidance or reduction of - Assessment year 1943-44 - After partition of assessee family as recorded under head 'Change in persons', assessee started a new business and taken in it a person as partner - Assessee's nephew was also taken as partner in business which was carried on by assessee and his minor sons - Both of said business were in complete control of assessee - Plea of assessee that the entered into partnership because he was afraid of his old age, was not found favoured with - Whether on facts, Tribunal correctly held that main purpose constituting two firms was avoidance or reduction of liability to excess profits tax within meaning of section 10A - Held, yes FACTS I The appellant assessee was the karta of the HUF consisted of himself, four major sons from his first wife and six minor sons from his second wife. The family was carrying on business. The four adult sons of the appellant separated from the family and were subsequently divided inter se. The assessee and his six minor sons continued to stay together and the appellant looked after the family. This happened after the accounting year of the assessee's family ended on 27-1-1942. The partition, thus, effected was to come into operation from the close of the accounting year. Subsequently, a document was executed on 10-8-1942, which recorded the partition as it had already taken place. All the assets and liabilities of business were pooled and dividend into two halves.…

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