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Badri Prasad Jagan Prasad Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 460 of 1964
Judge
Reported in[1973]87ITR678(All)
ActsIncome Tax Act, 1922 - Sections 10(2) and 25(4); Income Tax Act, 1918
AppellantBadri Prasad Jagan Prasad
RespondentCommissioner of Income-tax
Appellant AdvocateAmbika Prasad, Adv.
Respondent AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Excerpt:
.....it was found necessary to send for a supplementary statement of the case for the purpose of ascertaining clearly the year in which the truck was purchased, the amount for which it was purchased, the year in which it was sold and the amount for which it was sold, whether any depreciation had been allowed after the purchase of the truck and, if so, for the year or years for which it had been allowed and whether the surplus of the sale proceeds over the written down value of the truck had been actually brought to tax by the income-tax officer under section 10(2)(vii). we have now received the supplementary statement from the tribunal and the information disclosed by it is as follows :the truck was purchased in the previous year relevant to the assessment year 1946-47 for rs......assessment suffered by it in the financial year 1922-23 and it is entitled to this relief in the year of assessment in which the income and profits of the accounting period in which discontinuance or succession takes place fall to be assessed.'6. in view of 'these observations, upon the finding of the tribunal that' succession took place on october 12, 1948, we are of opinion that the tribunal was right in holding that the assessee was not entitled to the benefit of section 25(4) in the year 1949-50 but he could avail of that benefit in the year 1950-51. the first two questions referred are answered in the affirmative.7. as regards the third question the facts are these. the assessee was carrying on a branch business under the name and style of m/s. jagan prasad shiv prasad of achnera......
Judgment:

Pathak, J.

1. Three questions have been referred by the Income-tax Appellate Tribunal under Section 66(1), Indian Income-tax Act, 1922. They are:

' 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not entitled to the relief under Section 25(4) in the year 1949-50 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the succession took place on October 12, 1948, and, consequently, the benefit of Section 25(4) could be availed of only in the year 1950-51

3. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the sum of Rs. 4,810 was rightly. taxed and asprofit under Section 10(2)(vii), second proviso, of the Indian Income-tax Act, 1922?'

2. The assessee is a Hindu undivided family carrying on business under the name and style M/s. Badri Prasad Jagan Prasad, Agra. It has a branch styled as M/s. Jagan Prasad Shiv Prasad of Achnera. The assessee was assessed under the Indian Income-tax Act, 1918.

3. In assessment proceedings for the assessment year 1949-50, the relevant previous year being the year commencing October 24, 1947, and ending October 11, 1948, the assessee alleged that on October 11, 1948, there was a partial partition in the family and various businesses owned by the family were divided through entries made in the account books. A partnership firm was constituted to carry on those businesses and succeeded the family on October 12, 1948. On May 10, 1949, the assessee filed an application before the Income-tax Officer claiming the benefit of Section 25(4), Indian Income-tax Act, 1922. The Income-tax Officer rejected the application. On appeal, the Appellate Assistant Commissioner of Income-tax set aside the order and called for a remand report from the Income-tax Officer. The report submitted by the Income-tax Officer set out that the partnership firm succeeded to the business of the family on October 12, 1948. The Appellate Assistant Commissioner then held that as the succession had taken place on a day of the previous year relevant to the assessment year 1950-51 the claim could not be considered in respect of the assessment year 1949-50. Thereafter, on appeal by the assessee, the Tribunal also held that the date of succession was October 12, 1948, and came to the finding that the claim of the assessee to the benefits conferred by Section 25(4) could be considered by the Income-tax Officer in the course of assessment proceedings for the year 1950-51.

4. In regard to the first two questions, there is a definite finding of fact by the Tribunal that the succession took place on October 12, 1948. That date marks the commencement of the previous year relating to the assessment year 1950-51. The Tribunal has held that the claim for the benefit conferred under Section 25(4) falls to be considered in the course of assessment proceedings for the year 1950-51. Clearly, no tax was chargeable for any profits that may have accrued on October 12, 1948, the date on which the succession took place. The profits of the broken period are exempt from tax. The Tribunal has also found that an application was made within time by the assessee that the profits of the previous year should be substituted by the profits of the broken period. It was held that the benefit so applied for was available to the assessee, not in the assessment year 1949-50 but in respect of the assessment year 1950-51. We are of the view that the Tribunal is right, having regard to what was said by the Bombay High Court in Ambaram Kalidas v. Commissioner of Income-tax, [1951] 19 I.T.R. 227 (Bom) where it was observed that any relief to which the assessee was entitled under Section 25(4) could be claimed only in the assessment year pertaining to the accounting period during which succession took place. In that case, the previous year ended on October 17, 1944, relevant for the assessment year 1945-46. Succession took place on October 18, 1944, which fell within the accounting period relevant for the assessment year 1946-47. The learned judges observed: ' Here we are dealing with the assessment of the assessee for the assessment year 1945-46, and clearly whatever relief the assessee is entitled to by reason of the fact that there was a 'succession to his business, that relief cannot be granted to him for the assessment year 1945-46, but it could only be granted to him for the assessment year 1946-47. Therefore, it will be open to the assessee to make a claim with regard to any relief to which he is entitled under Section 25(4) in the assessment year 1946-47.'

5. There are also the observations of the Supreme Court in Commissioner of Income-tax v. K. Srinivasan and K. Gopalan, [1953] 23 I.T.R. 87, [1953] 1 S.C.R. 486 (S.C.): '

'The object of Sub-sections (3) and (4) is to provide relief to a business for the double assessment suffered by it in the financial year 1922-23 and it is entitled to this relief in the year of assessment in which the income and profits of the accounting period in which discontinuance or succession takes place fall to be assessed.'

6. In view of 'these observations, upon the finding of the Tribunal that' succession took place on October 12, 1948, we are of opinion that the Tribunal was right in holding that the assessee was not entitled to the benefit of Section 25(4) in the year 1949-50 but he could avail of that benefit in the year 1950-51. The first two questions referred are answered in the affirmative.

7. As regards the third question the facts are these. The assessee was carrying on a branch business under the name and style of M/s. Jagan Prasad Shiv Prasad of Achnera. At that branch a truck was purchased in the previous year relating to the assessment year 1946-47. The truck was sold during the previous year relevant for the assessment year 1949-50. The Income-tax Officer treated a sura of Rs. 4,810 as profit on the sale of the truck liable to be included under the second proviso to Section 10(2)(vii) of the Act. Before the Tribunal the assessee contended that, as no depreciation was actually allowed in respect of the truck in any of the years from the date of its purchase to the date of its sale, the provisions of the second proviso to Section 10(2)(vii) were not attracted. The contention was rejected by the Tribunal. When this case came on for hearing in the first instance before this court it was found necessary to send for a supplementary statement of the case for the purpose of ascertaining clearly the year in which the truck was purchased, the amount for which it was purchased, the year in which it was sold and the amount for which it was sold, whether any depreciation had been allowed after the purchase of the truck and, if so, for the year or years for which it had been allowed and whether the surplus of the sale proceeds over the written down value of the truck had been actually brought to tax by the Income-tax Officer under Section 10(2)(vii). We have now received the supplementary statement from the Tribunal and the information disclosed by it is as follows : The truck was purchased in the previous year relevant to the assessment year 1946-47 for Rs. 9,000. It was sold during the previous year relevant to the assessment year 1949-50 for Rs, 11,810. No depreciation had been allowed after the purchase of the truck. As regards the point whether the surplus of the sale proceeds over the written down value had been actually brought to tax by the Income-tax Officer under Section 10(2)(vii) the Tribunal has attempted an analysis of the several components into which the surplus could be broken and has attempted to show that a sum of Rs. 2,127 could be properly included in the assessment as representing the residual surplus in the plying of the truck. This latter circumstance appears to us to be of no relevance having regard to the question framed for the opinion of this court. It is sufficient, to point out that having regard to the finding of the Tribunal that no depreciation had been allowed at' all after the purchase of the truck the second proviso to Section 10(2)(vii) cannot be invoked at all. Accordingly, we answer the third question in the negative.

8. The three questions are answered as follows :

Question No. 1: In the affirmative.

Question No. 2 : In the affirmative.

Question No. 3 : In the negative.

9. In the circumstances of the case, there is no order as to costs. The counsel's fee is assessed at Rs. 200


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