JUPUDI KESAVA RAO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us is, In the circumstances of this case is the petitioner herein liable to be assessee under Section 26(2) of the Indian Income Tax Act?

(2.) THE circumstances are these : THE petitioner, J. Kesava Rao, and his deceased father J. Gangayya constituted a Hindu undivided family deriving income from money-lending business. Gangayya was manager of the family and the assessments used to be levied on him as representative of the family. For the assessment of the 1932-33 (accounting year 1932-32) notice was issued to Gangayya under Section 22 (2) of the Income Tax Act on the 9th April, 1932, and he filed his return on the 20th May, 1932 showing a net income of Rs. 12,755. Gangayya died on the 15th July, 1932, before assessment could be levied on him. After his death the petitioner continued to carry on the business. Notices were then issued to him under Sections 22(4) and 23 (2) of the Act. He complied with these notices and was finally assessed to income tax on a total taxable income of Rs. 50,550. THE Income Tax Officer did not levy on him super tax on the excess over Rs. 30,000 of the total income on the assumption that the petitioner like his father represented a Hindu undivided family.

(3.) BOTH the questions raised are not free from difficulty. Section 26(2) has not been very happily worded. The term "the person carrying on any business, profession or vocation has been succeeded in such capacity by another person" may well suggest that what is contemplated is merely succession in the management of business by another person, but obviously that cannot have been the intention of the Legislature. It appears to us that the word succession as used in the section connotes a transfer if ownership and the person who succeeds another must have by such succession become the owner of the business which his predecessor was carrying on and which he after the succession carries on in such capacity, that is, the capacity as owner. If this view is correct, as we think it is then it seems fairly clearly that the undivided Hindu family which was carrying on business has not been succeeded in such capacity by the petitioner as the petitioner was himself in part the owner of the property already and as such there has been no transfer of ownership in the business as he has become entitled to it by survivorship. No authority relevant for deciding the point has been cited by either side. The decision relied on by the Commissioner in V. R. S. A. R. Arunachalam Chettiar v. Commissioner of Income Tax, Madras in which it was held that in cases where there has been a partition of an undivided Hindu trading family, Section 26 applies, does not help him, for those are not cases where one party gets the property of another by surviorship. It would therefore follow that the petitioner has not succeeded to the business of his father within the meaning go Section 26(2) of the Act is not therefore liable to be assessed under that section.