CHENGALVAROYA CHETTIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) WHETHER the sum of Rs. 30,450 paid by the assessee to the Government under the instrument of lease dated July 2, 1930, is inadmissible as a revenue expenditure; and (2) whether after dissolution of the partnership the Income-tax Officer had jurisdiction to assess the firm as a unit and whether Section 44 of the Act gives jurisdiction to the officer both to make a joint and single assessment or whether the individual partners alone are liable to be assessed in respect of their proportionate share.

(2.) THE object of that section is perfectly clear. It is to enable the tax on the profits of a firm which has been discontinued to be got by the Income-tax authorities and to prevent the avoidance of taxation by the discontinuance of the firm. THE words are, in our opinion, perfectly clear but Mr. Subbaroya Ayyar contends that unless an assessment upon the firm has already been made before its discontinuance, which is not the case here the partners of it cannot be assessed jointly after its discontinuance, because according to him the words tax payable in the section mean payable as the result of an assessment already made upon the firm. If this contention is correct it leads to a strange result. THE object of the section being perfectly clear, viz., to get at the tax on the profits of the firm made before its discontinuance, and bearing in mind that that is its object, the result of the contention, if correct, would be that the tax recoverable would be less than that recoverable if the business had not been discontinued. In such a case the tax would have been upon the profits of the business but if a separate assessment is made upon the partners separately and not jointly after the discontinuance of the business it is conceded that the tax recoverable would be less. We are unable to see why the fact that an assessment has not been made upon the firm previous to its discontinuance should bring about such a result. It seems to us that tax payable means tax that is due to be paid, tax which the firm or partnership would be liable to pay if it had not been discontinued; tax either found to be due already or that will be found to be due in the future. THE being so, we are clearly of the opinion that the Income Tax authorities were correct in assessing the partners of the discontinued firm jointly and severally in respect of the profits earned by the firm before it was discontinued. Question No. 2 is answered accordingly. THE Income-tax Commissioner will get Rs. 250 costs.