HOTEL BROADWAY COMPLEX Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us under the provisions of the Income-tax Act, 1961, reads thus :

(2.) THE assessee firm commenced the business with effect from June 1, 1973, and its first accounting year ended on March 31, 1974. A portion of the property in the possession of the firm was let out earlier and the income therefrom was being assessed under the head "Income from house property" though a substantial portion of the building is used for the business of boarding and lodging of the assessee. During the earlier years, the same business was being carried on by a firm called "Messrs. Chidambaram Brothers" (hereinafter referred to as the "earlier firm"). This earlier firm came into existence in the year 1959 with five partners out of whom Ananthasivan was one of the partners. THE building which belonged to this firm was sought to be levied with property tax by the Corporation of the City of Bangalore; the matter was pending thereafter in litigation. During the pendency of this litigation, the earlier firm was dissolved. THE earlier firm had incurred several debts. As per the deed of dissolution, the entire assets and liabilities were taken over by Ananthasivan including the goodwill of the business. This dissolution was effected under a deed dated May 27, 1973. Within a few days, the assessee firm was reconstituted under a deed dated June 1, 1973. THE property tax which was the subject matter of litigation in the High Court went in favour of the Corporation of the City of Bangalore. THErefore, the Bangalore City Corporation proceeded to recover the arrears of property tax from the assessee-firm which was occupying the property in question. A demand notice was issued and coercive steps were sought to be taken. THErefore, the assessee firm paid the arrears of tax.

(3.) ORIGINALLY, the business was being carried on by a firm called "Chidambaram Brothers". It was dissolved on May 27, 1973. One of the partners of this dissolved firm was Ananthasivan. As per the deed of dissolution, Ananthasivan was entitled to the rights and liabilities of the business and it was his sole responsibility to discharge the debts of the firm; goodwill of the firm was also given to him.