SETH BISHAN CHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 21 of the Excess Profits Tax Act read with Section 66(1) of the Income -tax Act. The questions referred to us for answer are as follows : '1. Whether there is any change in the person carrying on a business within the meaning of Section 8(1) of the E. P. T. Act 1940 when the business which was previously carried on and owned by a Hindu undivided family is on disruption of the family, carried on and owned by a partnership composed of the members of the quandum family? 2. Whether the succeeding partnership is entitled to claim the set off of the deficiencies of profits of the chargeable accounting periods when the business was owned by the family?

(2.) FROM the facts set out in the statement of the case, it appears that Kalicharan aud Chotey Lal were two brothers. Kalicharan had. two sons Bishan Chandra and Triloki Nath, while Chotey Lal had one son Shiva Prasad. Bishan Chandra, Triloki Nath and Shiva Prasad were all members of a joint Hindu family. Upto 29th September 1941, they carried on business and were assessed to Excess Profits Tax as a Hindu undivided family. On 29th September 1941, there was a disruption in the family and Seth Bishan Chandra and Seth Shiva Prasad, representing the two branches of Kalicharan and Chotey Lal, entered into a partnership. From the statement of the case it appears that the joint family broke up into two parts, Seth Shiva Prasad and his sons remaining joint as one unit and Kali Charan's two sons and their descendants forming the other unit. The partnership thus became a partnership between Seth Bishan Chandra as karta representing his branch and Seth Shiva Prasad as karta representing his branch. Who the karta of the joint family was while the family was still joint does not appear from the statement of the case. The profits made by this joint Hindu family during the year immediately previous to the partition were below the standard profits and the question arose whether this deficiency could be carried forward and could be set off against the profits made by the partnership consisting of Seth Bishan Chandra and Seth Shiva Prasad representing their respective families.

(3.) SECTION 7 of the Excess Profits Tax Act deals with question of granting relief on occurrence of deficiency of profits and Section 8 lays down in what circumstances such deficiency cannot be set off against the profits made in subsequent years.