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Motilal Sanwarmal Vs. State of Orissa - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtOrissa High Court
Decided On
Case NumberS.J.C. No. 39 of 1966
Judge
Reported in[1971]28STC718(Orissa)
AppellantMotilal Sanwarmal
RespondentState of Orissa
Appellant AdvocateR. Mohanty, Adv.
Respondent AdvocateS.C. Mohapatra, Standing Counsel (Sales Tax)
Excerpt:
- state financial corporations act, 1951 [63/1951]. section 29; [p.k. tripathy, a.k. parichha & n.prusty, jj] discharge of loan orissa forest act (14 of 1972), section 56 confiscation of vehicle - held, the authorities under section 56 of the orissa forest act, 1972 are not obliged to release the vehicle from the confiscation proceeding or to pay the sale proceeds of the vehicle after the order of confiscation in favour of orissa state financial corporation when such vehicles were purchased on being financed by the orissa state financial corporation and the loan had not been liquidated by the date of the seizure/confiscation of the vehicle. concept of first charge or second charge has no applicability when the vehicle is not otherwise disposed of to determine the liabilities of the..........assessment was made under section 19(3) which runs thus: 19. (3) if any business carried on by a firm, hindu undivided family or an association of persons has been discontinued or dissolved, every person who was at the time of such discontinuance or dissolution, a partner of such firm or member of a hindu undivided family or such association shall, in respect of the turnover of the firm, hindu undivided family or association be jointly and severally liable to assessment under section 12 and for the amount of tax payable and all the provisions of the act, shall, so far as may be, be applied to such assessment: provided that where a partner of a firm retires before the dissolution of the firm, he shall, notwithstanding any contract to the contrary, be jointly and severally liable to pay.....
Judgment:

G.K. Misra, C.J.

1. Matrumal and Motilal are members of a Hindu undivided family. As H. U. F. they carried on business under the name and style of Matrumal Modi. On 28th June, 1961, there was a disruption of the joint status as evidenced by a registered partition deed. The business was allotted to Motilal. On 2nd March, 1963, Motilal was assessed for the quarter ending 30th June, 1959, under Section 12(5) of the Orissa Sales Tax Act. The assessment was made under Section 19(3) which runs thus:

19. (3) If any business carried on by a firm, Hindu undivided family or an association of persons has been discontinued or dissolved, every person who was at the time of such discontinuance or dissolution, a partner of such firm or member of a Hindu undivided family or such association shall, in respect of the turnover of the firm, Hindu undivided family or association be jointly and severally liable to assessment under Section 12 and for the amount of tax payable and all the provisions of the Act, shall, so far as may be, be applied to such assessment:

Provided that where a partner of a firm retires before the dissolution of the firm, he shall, notwithstanding any contract to the contrary, be jointly and severally liable to pay the tax or other amount due by it up to the date of his retirement and all the provisions of this Act shall, so far as may be, be applicable to him.

2. The assessing authorities and the Tribunal held that the business of the Hindu undivided family had discontinued inasmuch as after partition the business which belonged to the joint family became the separate property of Motilal. In his hands, it no longer continued to be joint family business and as such he was liable to be assessed under Section 19(3) in respect of the turnover of sales effected by the joint family during the relevant quarter. The dealer (petitioner) asked for a reference under Section 24(1). The application was rejected. He accordingly approached this Court under Section 24(2). This court framed the following question and called for a statement of the case :--

Whether in the facts and circumstances of the case, the allotment of the joint family business on partition, to one of the members of the family amounts, in law, to 'discontinuance' or 'dissolution' of the business as contemplated in Section 19(3) of the Orissa Sales Tax Act, 1947.

The Tribunal has accordingly referred the aforesaid question, together with a statement of the case under Section 24(3).

3. The short question for consideration is whether the joint family business allotted in a partition to the share of Motilal can be said to have been discontinued. Two views are possible. One is that so long as the integrity of the business has not been affected in any manner, it cannot be said to have been discontinued even though it has passed to a different hand by succession. The alternative view is that the moment the ownership changes, the business has discontinued even though its integrity might not have been affected. The latter view was accepted by the Bombay High Court in In re P. E. Poison, [1942] 10 I.T.R. 52 while construing a similar expression in Section 25(3) of the Indian Income-tax Act, 1922. Many other High Courts, however, accepted the former view as correct. The conflict was resolved finally by the Privy Council in Commissioner of Income-tax v. P. E. Poison [1945] 13 I.T.R. 384 (P.C.). Their Lordships said that it had been uniformly decided in a number of decisions that the word 'discontinued' or 'discontinuance' did not cover mere change of ownership, but referred to a complete cessation of business. Their Lordships entertained no doubt about the correctness of those decisions which appeared to them to be in accord with the plain meaning of the Section and to be in line with similar decisions on the English Income Tax Acts.

The same view has been taken in Commissioner of Income-tax v. K.H. Chambers, Madras [1965] 55 I.T.R. 674 (S.C.).

4. The position, therefore, is that if the integrity of the business continues in the hands of the successor, there is no discontinuance of business even if there be a change in the personnel or the owner of the business. In the present case, the Hindu undivided family had the business. In the partition, it fell to the share of the petitioner. He continued the business in its old form and shape and there was no discontinuance. The petitioner is, therefore, not liable to be assessed under Section 19(3) of the Orissa Sales Tax Act.

5. On the aforesaid analysis, the question is answered in the negative. The view taken by the Tribunal in its appellate judgment cannot be supported.

6. In the result, the reference is accepted. In the circumstances there will be no order as to costs. Reference fee, deposited, be refunded.

Acharya, J.

I agree.


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