SUBBARAYA IYER M Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, Sri M. Subbaraya Iyer, has been a practitioner in matters connected with income-tax. He commenced practice in 1910 and was an assessee under the Indian Income-tax Act of 1918. By 1952, he had established a voluminous practice. On March 30, 1952, he entered into a partnership with four juniors of his, one of whom is his son. It was agreed that the five persons should carry on in partnership the business or profession of lawyers and advocates as from the March 30th, 1952, the profession heretofore carried on by the first partner, Sri Subbaraya Iyer, with the help of partners 2 to 5. On and after the formation of the above firm, all the; pending professional engagements of Subbaraya Iyer were handed over to the firm. It is common ground that there were no such professional engagements of the other partners which were so transferred to them. It is also common ground that on and after the formation of this partnership, all the fees recoverable in connection with the professional engagements subsequent to the date of the creation of the; partnership, were realised by the firm. On the basis of these facts, the assessee informed the Income-tax Officer that the firm referred to had succeeded to the business or profession which he had been carrying on, and applied for relief under section 25 (4). THE Income-tax Officer denied the relief holding that though the profession carried on by the assessee had been transferred as a whole to the partnership, the assessee had "not given up the profession altogether which is still being carried on by the firm of which he is the major partner with five annas share in the rupees. Nobody in common parlance will say that the assessee had discontinued his profession. Everybody will say that he still carried on his occupation as a partner in a firm instead of carrying it on individually." In appeal, the Appellate Assistant Commissioner also held that there was no succession. THE Tribunal, in its order dismissing the appeal of the assessee, while accepting the genuineness of the partnership, yet hold that since the practice depended purely on the skill and ability of the assessee, that could not be transmitted; that there was no cessation of the assessees professional activities; and consequently, no succession could be spelt out of the transaction.

(2.) IT is on these facts that we have to decide the question referred to us under section 66 (1) of the Indian Income-tax Act, viz.;

(3.) LATER we shall deal with the question where the partnership claims to have succeeded to the business of an individual but the above passage makes it clear that through a business might have depended almost entirely upon the all land ability of the person carrying it on and the changed ownership of the business might to have the advantage of that skill and ability of that person, that would not be a reason for holding that there could not be a succession.