Full Judgment Text
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PETITIONER:
M/S. E. D. SASOON & CO. LTD. BOMBAY
Vs.
RESPONDENT:
THE C.I.T. BOMBAY CITYAND VICE VERSA
DATE OF JUDGMENT29/08/1972
BENCH:
ACT:
Income-tax Act 1922, S. 25(3)-Company taking over several
businesses carried on by a firm which had paid tax under the
Act of 1918 Whether shares & securities business taken over-
If one of several businesses not taken over whether company
can claim, benefit under section 25(3).
HEADNOTE:
The appellant company purchased the business of a
partnership firm towards the end of 1920, The firm bad
carried on business as bankers, commission agents, agents of
joint stock companies and dealers in shares and securities
foreign exchange etc., in and outside India. Pursuant to
the agreement of purchase the appellant company took over
the business of the firm and also purchased shares and
securities worth Rs. 1,93,79,521-3-1 at market value as on
31st December 1920. It further purchased between 1st
January 1921 to 31st January 1921 from the market further
shares and securities worth Rs. 4,28,05,627 in the ordinary
course of his business. In the year of assessment 1949-50
the appellant company discontinued its business and claimed
exemption on Rs. 33,40,057 under s. 25(3) of the Income-
,tax Act 1922. This claim was rejected by the Income-tax
officer on the ground claimed and obtained a deduction
(1)that in the year 1921 the assesses in respect of
appreciation in shares and securities amounting to Rs.
9,26,708 and (2) it had discontinued one of the business
which the firm was doing namely dealing in stocks and
shares. The Tribunal held that the business was assessed to
tax under the Act of 191 & but found that the shares and
securities were purchased by the company from the
partnership firm not with the intention of dealing in
securities but as an investment. The High Court in
reference held that the company was a dealer in shares and
securities immediately after it took over from the firm. On
a different quest-,ton the High Court gave its answer
against the assessee. Both parties appealed to this Court
with certificates. The assessee did not press its appeal.
In the appeal on behalf of the Revenue it was contended that
the Tribunal had found that the shares and securities
business carried on by the firm was not taken over by the
company and therefore the company was not carrying on the
same business as the firm with the result that ’it could not
claim the benefit of s. 25(3).
Dismissing the Revenue’s appeal,
HELD : An assessee to obtain relief under s. 25(3) has to
satisfy their condition. Firstly, that the business,
profession or vocation must be one on which tax was at any
time charged under the 1918 Act. Secondly, the case must be
one where them has not been a succession after 1st April
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1939 attracting the application of sub-s. (4). Thirdly, the
business must be discontinued; such discontinuance amounting
to a complete cessation of business and not merely a
succession or change of ownership. [1090C]
In sub-section (3) there is a clear reference to the
business and not to the assessee and therefore the sub-
section applies even if the person claiming the relief was
not himself charged under the 1918 Act but his predecessor-
in-interest was so charged. [1090F]
The High Court had taken into consideration the assessment
Order for the years 1921-22 and 1922-23 dated the 10th
January, 1923 for the
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conclusion that the assessee company was taxed on profits on
dealings in shares and stocks in respect of those years
which in its view showed beyond doubt that the company was
trading in shares and securities for the year 1921
immediately after it took over from the firm. Even
otherwise also there was sufficient material on the record
to hold that the entire business of the firm which included
dealing in shares and stocks was taken over by the assessee
company as a going concern, that large holdings of stocks
and shares were transferred to the assessee company and that
there is no evidence to show that for the years 1920-21,
1921-22 and also for subsequent years, the assessee company
was not dealing in shares. on the other hand the Statement
of the case clearly disclosed that the company purchased in
the market during the period 1st January, 1921 and 31st
December 1921, shares and stock-, worth Rs. 4,28,05,627 in
the ordinary course of its business. The logical inference
which arose from the above circumstances was that the
assessee company carrying on the same-business as that of
the firm including dealing in shares and stocks. There was
also no material on, record which would justify the Income-
tax Authorities or the Tribunal in coming to the conclusion
that the shares and ’stocks which were transferred to the
assessees company were only intended to be held as
investments. [1093F-1094B]
There was no doubt that to Income-tax Officer had omitted
for some to include in the income Rs., 9,76,708 being the
appreciation of shares and stocks for the accounting year
1921 for which the assessment year is 1922-23, but that is
not to say that the assessee cornpany did not deal in shares
and stocks in that year. [1094E]
In any case irrespective of the question whether the
assessee company was dealing in shares after it had taken
over the business from the Am, it was clear that the
company was, carrying on several other businesses which it
had taken over from the firm as a going concern. Even where
one or two businesses activities were discontinued after the
assessee company took over, nonetheless it would not justify
the Court in holding that the business of the firm which was
taken over had been discontinued, because under s. 25(3)
there is no restriction to the applicability of the
exemption only to income on which the tax was payable under
any particular head. [1094G-H]
Commissioner of Income-tax, Bombay City 1 v. Chugandas &
Co., 55 I.T.R. 22. applied.
Commissioner of Income-tax, Bo bay v. P. E. Polson, 13
I.T.R. 384. Executors of Estate of Dubash v. Commissioner of
Income-tax, 19 I.T.R. 182 and O.R.M.M.S.P. SV. Firm v.
Commissioner of Income-tax, Madras, referred to.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 26 and 162
of 1969.
Appeals by certificates from the judgment and order dated
October 13, 14 and 16, 1967 of the Bombay High Court in
Income-tax Reference No. 98 of 1962.
S. T. Desai, R. J. Kolah, D. H. Dwarkadas, M. L. Bhakta,
A. K. Verma, J. B. Dadachanji, O. C. Mathur and Ravinder
Narain for the appellants in C.A. No. 26 of 1969 and
respondent in C.A. No. 162/69.
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S. Sen, J. Ramamurthi, B. D. Sharma, R. N. Sachthey
and S. P. Nayar, for the respondent in C.A. No. 26/69 and
appellant in C.A. No. 162 of 1969.
The Judgment of the Court was delivered by
P. Jaganmohan Reddy, J. These two appeals are by certificate
against the judgment of the High Court of Bombay answering
four out of the five questions referred to it in favour of
the assessee and one question in favour of the revenue.
A partnership firm (hereinafter referred to as the firm)
comprising of some of the members of the Sassoon family was
carrying on business under the name and style of E. D.
Sassoon & Co. for a number of years prior to 1920 at Bombay,
Calcutta, Karachi, Hongkong, Shanghai, London, Manchester,
Basra and the Persian Gulf. The business which it was
carrying on was that of the bankers, commission agent,
agents of joint stock companies, dealers in shares and
securities, foreign exchange etc. In the accounting year
1919 the firm incurred net loss of Rs. 12,37,41312-2 but in
1920 it seems to have made large profits mostly "in London
Exchange Account". It however claimed depreciation in
shares and securities amounting to Rs. 9,26,730-5-8 shown
under the head depreciation in shares and securities. On
8th September 1920 and 4th December 1920 two companies were
incorporated in Bombay the former was known as the Bombay
Trust Corporation Ltd. and the latter as E. D. Sassoon & Co.
Ltd. (hereinafter called the ’assessee company’). The
Bombay Trust Corporation carried on business in Bombay which
comprised mainly the business of dealers in shares,
securities and foreign exchange. This company (B.T.C.) had
by the end of December 1920 investments in shares and
securities to the extent of Rs. 3,23,78,494/-. By the end
of 1921 investments in shares and securities had risen to
Rs. 4,31,32,212/- and by the end of December 1922 these
investments had risen to Rs, 10,43,78,511/-. Though these
facts have been given in the statement of the case, as we
shall presently show, they are not germane for the deter-
mination of the questions before us.
The assessee company was incorporated with several objects
one of which was
"To acquire and take over as a going concern
the business now carried on at Bombay,
Calcutta, Karachi, Hongkong, Shanghai, London,
Manchester, Basra and Bagdad and all or any of
the assets and liabilities of the proprietors
of that business in connection therewith, and
with a view thereto, enter into the Agreement
referred
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to in clause 4 of the Company’s Articles of
Association and to carry the same into effect
with or without modification."
Clause 4 of the articles of association of the company
provided that the assessee company shall forthwith enter
into the agreement mentioned in cl, 3 of the, Memorandum of
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Association with such, modifications, if any as the
directors shall approve. On June 30, 1961 the agreement
referred to was finally executed by the assessee company.
The said agreement provided inter alia for purchase of the
business of the said firm and its assets including shares,
and debentures for valuable consideration therein set out at
the market price prevailing on 31st December 1920 which
purchase was to be completed on or before that date. It
appears that pursuant to the said agreement the company took
over the business of the said firm and also purchased shares
and securities worth Rs. 1,93,79,521-3-1 at market value as
on 31st December 1920. It further purchased between 1st
January 1921 to 31st January 1921 from the market further
shares and securities worth Rs. 4,28,05,627 in the ordinary
course of its business.
According to the Income-tax Officer in the accounting year
1921 there was no dealing in shares and securities. At the
end of the year 1921 as was done by the predecessor firm in
the year 1920 the assessee company valued the securities and
shares at the prevailing market rates which showed an
appreciation of Rs. 9,26,713 on its valuation at the market
rate. The appreciation of Rs. 9,26,730-5-8 was however not
taxed because it is alleged that the assessee company had
contended that this appreciation should be delated from the
computation of income. At the relevant time during the
course of the assessments the assessee company’s accounts
were examined by the examiner of accounts who made the
following note on 12th October, 1922:--
"With regard to the second item it would be
seen from the last year’s "B" form put up
herewith with the company is a habitual dealer
of shares has set off against profits of 1920
the loss of shares and securities (depre-
ciation). Hence appreciation of Rs. 9,27,708-
67 will have to be taxed this year."
On the above report the Income-tax Officer endorsed on the
23rd December, 1922 as follows :-
"NOTE :-Shares and securities of Rs.
6,55,895/and Rs. 3,28,112/- book entry
securities being valued at the end of the year
and appreciation or depreciation brought into
account. These securities are being taken
over by the new company. B.T.C. Ltd. Bombay
shows
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this on the instructions from the House, only
and these items may therefore be disregarded
for the income-tax purposes."
It may be mentioned that the firm was being assessed for the
year 1921-22 under the Income-tax Act 1918 on the income of
the, ,accounting year 1921 and for the assessment years
1922-23 to 1948-49 the assessee company was being assessed
under the Act of 1922. In the year of assessment 1949-50
the assessee company discontinued its business and claimed
exemption on Rs. 33,40,057 under S. 25 (3) of the Act. This
claim was rejected by the Income-tax Officer on the ground
(1) that in the year 1921 the, assessee claimed and obtained
a deduction in respect of appreciation in shares and
securities amounting to Rs. 9,26,708/- and (2) it had
discontinued one of the businesses which the firm was doing
namely dealing in stocks and shares.
The assessee company appealed and the Appellate Assistant
Commissioner held that on the evidence it was clear that the
business which was discontinued in the year of assessment
was not charged to tax under the Act of 1918 on the income
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from share dealings either for the accounting years 1918 or
1919, 1920 ,or for the accounting year 1921. As the
assessment to tax on the share dealings was a basic
requirement for exemption under S. 25(3) and that not having
been established the question of granting any relief under
the said provision did not arise:. The Tribunal in appeal
though it held that the firm was assessed to tax under the
Act of 1918 nevertheless negatived the relief on the ground
that the assessee company did not intend to do the business
of dealing in securities acquired from the old firm. On an
application by the assessee company for reference under s.
66 (1) the following five questions were referred to the
High Court :-
"(1) WHETHER on the facts and in the circums-
tances of the case the assessee. company is
entitled to claim exemption under Section
25(3) of the Act?
(2) WHETHER on the facts and in the circums-
tances of the case the loss suffered on the
sale of property in Shanghai was allowable as
a revenue deduction out of profits of the
year?
(3) WHETHER on the facts and in the circums-
tances of the case the assessee company is en-
titled to deduct Rs. 3,70,943/- the amount
transferred to the Superannuation Fund against
income of the year?
(4) WHETHER on the facts and in the circums-
tances of the case the assessee company is en-
1089
titled to claim a sum of Rs. 2,92,672/- trans-
ferred after the liquidation of the company as
against the profits of the company ?
(5) W14ETHER on the facts and in the
circumstances of the case the assessee company
is entitled to set off the loss of Rs.
3,28,825/’- suffered in 1948 as against profit
of 1949-50 ?
Except for the second question, the High Court answered the
other four questions against the revenue, the appellant in
Civil Appeal No. 162 (NT) of 1969. On the second question
its answer was in favour of the revenue and against the
assessee company in respect of which it has filed Civil
Appeal No. 26 of 1969.
On behalf of the revenue it is submitted that question No. 1
is the crucial question in that the determination of what is
meant by discontinuance of business, profession or vocation,
for purposes of s. 25(3) would also furnish the answers to
the other questions in the appeal. No arguments were
addressed to us on those questions.
Sub-s. (3) of s. 25 under which the relief is being claimed
is, as follows :-
"(3) Where any business, profession or
vocation on which tax was ’at any time charged
under the provisions of the Indian Income-tax
Act, 1918 (VII of 1918), is discontinued,
then, unless there has been a succession by
virtue of which the provisions of sub-section
(4) have been rendered applicable no tax shall
be payable in respect of the income, profits
and gains of the period between the end of the
previous year and the date of such
discontinuance, and the assessee may further
claim that the income, profits and gains of
the previous year shall be deemed to have been
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the income, profits and gains of the said
period. Where any such claim is made, an
assessment shall be made on the basis of the
income, profits and gains of the said period,
and if an amount of tax has already been paid
in respect of the income, profits and gains of
the previous year exceeding the amount payable
on the basis of such assessment, a refund
shall be given of the difference."
This provision has been enacted to give relief to a tax
payer upon whom extra burden had been imposed due to a
change in the basis of assessment as a result of the Act of
1922. Under the 1918 Act the tax liability was imposed on
the income accruing or arising in the year of assessment
while under the 1922 Act the liability was in respect of
income accruing or arising in the
1090
previous year. Thus when the Act came into force in 1922 it
entailed two assessments in respect of the income of the
same year, that is, the income of the, year 1921-22 which
had been assessed during the currency of that year under the
1918 Act was subjected to tax once again under the Act as
the income of the previous year for the assessment year
1922-23. In view of this hardship, sub-s. (3) provided that
in the case of discontinuance of any business, profession or
vocation which was at any time charged under the 1918 Act-
no tax is payable in respect of the period between the end
of the previous year and the date of discontinuance. An
assessee to obtain relief under the above sub-section has to
satisfy three conditions. Firstly, that the business,
profession ,or vocation must be one on which tax was at any
time charged under the 1918 Act. Secondly, the case must be
one where there has not been a succession after the 1st
April, 1939 attracting the application of sub-s. (4).
Thirdly, the business must be ’discontinued’, such
discontinuance amounting to a complete cessation of business
and not merely a succession or change of owner-ship. In the
case of Commissioner of Income-tax, Bombay v. P.E.
Polson(1) which was also referred to by Patanjali Sastri,
J. in Executors of Estate of Dubash v. Commissioner of
Income-tax (2 ) the Privy Council has pointed out that
the purpose and ,effect of sub-section 3 was clearly to give
relief to a tax payer who but for it would in the aggregate
be charged with tax once in respect of every year’s income
and twice in respect of one year’s income. There is no
dispute in this case that the, assessee company had
discontinued its business from the 28th December 1948 when
it went into liquidation. The only dispute is, whether the
assessee company carried on the business of the firm which
was assessed to tax under the 1918 Act and whether the firm
was charged to tax under the 1918 Act. It may be mentioned
that in sub-s. (3) there is a clear reference to the
business and not to the assessee and therefore that sub-
section applies even if the person claiming the relief was
not himself charged under the 1918 Act but his predecessor-
in-interest was so charged. It is contended on behalf of
the Revenue that the assessee company did not carry on the
same business as that carried on by the firm in that the
business in dealing in shares and stocks which the firm was
carrying on was not carried on by the company which merely
held those shares as investment and did not deal in them.
It has been noticed earlier that the firm was carrying on
several businesses one of which was dealing in shares, and
stocks and when the assessee company took over the assets
and liabilities of business, it is said relying on the
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observations of the Tribunal that all. those businesses
except the business of dealing in shares and stocks was
taken over and that the shares and stocks which it held
(1) 13 I.T.R. 384.
(2) 19 I.T.R. 182.
1091
were held for and on behalf of the B.T.C. It is accordingly
contended that the assessee company was not carrying on the
same business.
It may be mentioned that one of the principal objects of the
assessee company as indicated in the memorandum of
association was to acquire and take over as a going concern
the business carried on by the firm E. D. Sassoon & Co. The
assets of the firm were taken over even prior to the
agreement which was entered into on the 30th June, 1921.
The Income-tax Officer thought that the assessee’s treatment
of its profit and loss arising out of the business of
dealing in shares have not been uniform. He also concluded
that in respect of the successive years at least upto 1938
the department has been treating the transactions on its
merits, but thereafter the assessee company was treated as a
regular dealer in shares and security; that. only a portion
of the shares and security represent stock in trade; that
there was no uniform valuation of the stocks and
investments, that in the year 1921 the deletion of the item
of appreciation of shares and security amounting to Rs.
9,76,708 which it was alleged was agreed to clearly on the
assessee’s contention that it was only an investor; and that
the business of dealing in shares and security of the
assessee company had not in the aggregate been charged to
income-tax in respect of every year’s income and twice in
respect of one year’s income inasmuch as the number of
assessments made on this business was far less than the
number of assessment made during its life. That apart this
business according to the Income-tax Officer was not in
existence at all in 1921 as the assessee company was not
dealing in shares and it was not at all charged to tax under
the Act of 1918.
The conclusions of the Appellate Assistant Commissioner in
respect of the accounting years 1918, 1919 and 1920 during
which period the firm was in existence and during the year
1921, the assessee company was functioning are given as
follows :-
" 1918-There is no evidence that any
assessment was made on the firm and the
appellant has failed to prove that any income
of the firm was charged to tax.
1919-This was a year of huge loss and no tax
was charged.
1920-There was no positive. income from shares
or share-dealings.
It is also not necessary to consider tax
payments by the firm during these years
because the entire stock-in-trade of the
business in share-dealings and securities
belonging to the firm was taken over by
another Limited Company the B.T.C. Ltd.,
assessed separately and the appellant did not
succeed to that business at all.
1092
1921-No income-tax was charged on the company
at all there being a net loss of more than Rs.
12 lakhs."
It may be, mentioned that the statement that no tax was
charged for the year 1918 is contrary to the material on
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record nor was the Assistant Appellate Commissioner
justified in holding that the entire stock in trade of
business in share dealings and security belonging to the
firm was taken over by another limited company, the B.T.C.
Limited because the Appellate Tribunal on both these points
has not confirmed those findings. The Tribunal summarised
its conclusions as follows :-
"(i) For the assessment year 1918 E.D.
Sassoon & Co., a firm was assessed to tax
under the Act of 1919;
(ii) For the year 1919 as there was huge,
loss no tax was charged;
(iii) In 1919 however the said firm had
included in the profit and loss account,
profit and loss on securities and shares.
(iv) For the year 1920 there was huge profit
and the shares and securities were transferred
to the assessee company at the then market
value of the shares and securities;
(v) Over Rs. 9,00,000/- of losses were
claimed by the said firm as a result of
revaluation and allowed by the Income-tax
authorities in the assessment of the said firm
for the year 1920;
(vi) The said firm was being held by the
Department to be a dealer in shares and
securities and the profit was brought to tax.
(vii) The applicant company neither intended
originally to do the business, nor took over
the business of dealing in securities from the
old firm."
From the findings of the Tribunal given in (ii), (iii), (iv)
and (v), it is apparent that it did not accept the findings
of the Appellate Assistant Commissioner that the tax was not
charged under the Act of 1918 on the income from the
dealings and shares for the accounting years 1919 and 1920.
It nonetheless as noticed earlier, affirmed the order of the
tax authorities on the ground that the business the company
took over from the firm, was not the same business, which
the firm was doing; at any rate, in the year in which the
assessee company took it over inasmuch as the
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assessee company neither intended originally to do the
business, nor took- over the business of dealing in
securities from the old firm. The only question is whether
the Tribunal was justified in holding that the assessee
company was not continuing the business which the firm was
doing prior to the sale of its business to the assessee
company.
The conclusions in item (vii) of the above summary seems to
be somewhat conflicting with those, in item (iv), but this
apparent contradiction is sought to be reconciled by
limiting the conclusion in clause (iv) to only the transfer
of shares and securities to the assessee company after which
the assessee company did not intend to do any business of
dealing in shares and stocks. But this attempt to reconcile
and explain the aforesaid two findings is unconvincing for
not only does the Tribunal not find that after- the
transfer- of shares and stock, to the assessee company by
the firm that it did not hold these shares and stocks but
also it did not hold that the assessee was not dealing in
the business of stocks and shares. On the other hand, the
Appellate Assistant Commissioner considering the claim of
loss in respect of Shanghai Property sold by the assessee
company observed : -
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"Ever since the incorporation of the company
on 4-12-1920 as a Private Limited Company and
till it went into liquidation on 29-12-1948,
the assessee’s business activities consisted
of :...... (v) Dealings in Shares and
Securities."
The High Court has taken into consideration the assessment
Orders for the years 1921-22 and 1922-23 dated 10th Janu-
ary, 1923 for the conclusion that the assessee company was
taxed on profits on dealings in shares and stocks in respect
of those years which in its view showed beyond doubt that
the company was trading in shares and securities for the
year 1921 immediately after it took over from the firm.
Even otherwise also there is sufficient material on the
record to hold that the entire business of the firm which
included dealing in shares and stocks was taken over by the
assessee company as a going concern that large holdings of
stocks and shares were transferred to the assessee company
and that there is no evidence to show that for the years
1920-21, 1921-22 and also for subsequent years, the assessee
company was not dealing in shares. On the other hand, the
Statement of the case clearly discloses is stated earlier
that the assessee company purchased in the market during the
period 1st January, 1921 and 31st December 1921 shares and
stocks worth Rs. 4,28,05,627/in the ordinary course of its
business. The logical inference
1094
which arises from the above circumstances is that the
assessee company was carrying on the same business as that
of the firm including dealing in shares and stocks. There
is also no material on record which would justify the
Income-tax Authorities or the Tribunal in coming to the
conclusion that the shares and stocks which were transferred
to the assessee’s company were only intended to be held as
investments.
It was again contended on behalf of the revenue that the re-
cords of assessments for the accounting year 1921 not only
showed that the appreciation in shares and stocks of Rs.
9,76,708/- was excluded but income from dividend and
securities amounting to Rs. 12,85,408/- was not taken into
account, and was assessed in the hands of B.T.C. Limited.
This is based on the order of the Income-tax Officer
notwithstanding the fact that the examiner of accounts had
pointed out that the company is habitual dealer in ,,;hares
and stocks and that the appreciation will have to be taxed.
On behalf of the assessee it is contended that the question
pertaining to this aspect was sought to be raised in the
application under s. 66(1) and when it was not referred an
application was made before the High Court for framing a
question dealing with this aspect. The High Court, however,
in the view it took, did not think- that that question need
be framed. There is no doubt that the Income-tax Officer
had omitted for some reason to include Rs. 9,76,708/- being
the appreciation of shares and stocks for the accounting
year 1921 for which the assessment year is 1922-23. but that
is not to say that the assessee company did not deal in
shares and stocks in that year, nor is there any basis for
the Income-tax Officer and, the Appellate Assistant
Commissioner in holding that B.T.C. Ltd. took over the share
holding from the firm and not the assessee company. The
Tribunal on the other hand held that the shares were
transferred to the assessee company. There is no mention in
its order that these shares were transferred to B.T.C. and
not to the assessee company. The shares and securities were
only transferred to the B.T.C. Ltd. in 1922.
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In any case, irrespective of the question whether the
assessee company was dealing in shares after it had taken
over the business from the firm, it is clear that the
assessee company was carrying on several other businesses
which it had taken over from the firm as going concern.
Even where one or two businesses activities are discontinued
after the assesses company took over, nonetheless it would
not justify us in holding that the business of the firm
which was taken over has been discontinued, because under s.
25 (3 ) there is no restriction to the applicability of the
exemption only to income on which the tax was payable under
any particular head. This is what was held by this Court in
Commissioner of Income-
1095
tax, Bombay City-1 v. Chugandas & Co.(1) Shah, J., after
noticing that what is to be regarded as income, profits and
gains of business, profession or vocation within the meaning
of section 25(3) for which exemption may be obtained on
discontinuance had given rise to difficulties, observed at
page 22 :--
"Now clause (3) of section 25 expressly
provides that income of a business, profession
or vocation which was charged at any time
under Act 7 of 1918 to tax is. on
discontinuance of that business, profession or
vocation, exempt from liability to tax under
Act II of 1922 for the period between the end
of the previous year and the date of such
discontinuance........ When, therefore,
section 25(3) enacts that tax was charged at
any time on any business, it is intended that
the tax was at any time charged on the owner
of any business. If that condition be
fulfiled in respect of the income of the
business, under the Act of 1918, the owner or
his successor-in-interest qua the business,
will be entitled to get the benefit of the
exemption under it if the business is
discontinued. The section in terms refers to
tax charged on any business, i.e.. tax charged
on. any person in respect of income earned by
carrying on the business, Undoubtedly, it is
not all income carried by a person who
conducted any business, which is exem
pt under
sub-section (3) of section 25; non-business
income will certainly not qualify for the
privilege. But there is no reason to restrict
the condition of the applicability of the
exemption only to income on which the tax was
payable under the head "profit and gains of
business, profession or vocation." The
legislature has made no such express
reservation and there is no warrant for
reading into subsection (3) it may be noticed
does not refer to chargeability of income to
tax under a particular head as a condition of
obtaining the benefit of the
exemption. . . . . But the exemption under
section 25(3) is general, it is not restricted
to income chargeable under section 10 of the
Act."
This case was referred to and followed in the case of O. R
M. M. SP. SV. Firm v. Commissioner of Income-tax,
Madras(2).
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It appears to us that in any view of the matter the assessee
company was entitled to relief under section 25(3), as such,
the judgement of the High Court has to be confirmed. The
learned
(1) 55 I.T.R. 22. (2) 63 I.T.R. 404.
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Advocate for the assessee has indicated that he does not
press the Civil Appeal No. 26(NT) of 1969 which deals with
the second question.
In the result, both these appeals fail and are dismissed
with
G.C. Appeals dismissed.
1097