Law:

Section:

Section 6(1) second proviso read with section 8(3) of the Excess Profits Tax Act, 1940 - Standard profit - Computation of - Assessees was a limited company which acquired a cotton mill from 'H' in year 1942 - That mill was in existence before 31-3-1936, and until date of transfer to assessees had been worked by 'H' - Assessees claimed that they were entitled under second proviso to section 6(1) to adopt standard profits on basis of statutory percentage permitted on average amount of capital employed - Whether it is only in case of business which was commenced after 31-3-1936, that option given in second proviso to section 6(1) arises, and change in ownership after 1-9-1939 does not make new owner an owner of new business for purposes of computation of profits - Held, yes - Whether, further, in view of section 8(3), assessees, business could not be regarded as a new business for purposes of computation of standard profits because transfer in ownership took place in year 1942, that is, after 1-9-1939 - Held, yes - Whether, therefore, assessees were not entitled to benefit of second proviso to section 6(1) - Held, yes FACTS The assessees was a limited company which acquired a cotton mill from 'H' in the year 1942. That mill was in existence before 31-3-1936, and until the date of transfer to the assessees had been worked by 'H'. 'H' who had operated the mill between the period September, 1939, and the year 1942 determined their standard profits on the basis of a standard period. The present assessees continued the same method between 1942 and the commencement of the chargeable accounting period, 1-7-1944. During that period the standard profits were computed on the basis of the standard year's profits. The assessees however then claimed that they were entitled under the second proviso of section 6(1) to adopt standard profits on the basis of the statutory percentage permitted on the average amount of capital employed. The assessees contended that as they took over the present mill in 1942 their business should be considered as having commenced on or after 31-3-1936. The Tribunal however held that the business which they carried on, namely, the business of…

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