MOTICHAND AND DEVIDAS Vs. IN RE

JUDGEMENT

(1.) THIS is a reference made by the tribunal of Appeal under Section 66(1) of the Indian Income-tax Act, in respect of the assessment of Messrs. Motichand and Devidas, Solicitors, for the accounting year 1939. The relevant facts are these.

(2.) THE firm of Messrs. Motichand and Devidas was carrying on business, as attorneys of this Court, since 26th January, 1909. THE first partnership deed, referred to in this reference, was dated 29th October, 1926, and was executed between Mr. Motichand G. Kapadia and Mr. Devidas J. Desai, they sharing the profits and loss equally. A fresh partnership deed dated 15th July, 1936, was executed when Mr. Tanubhai, son of Mr. Devidas, was admitted as a partner. THE shares of the partners were then readjusted, Mr. Motichand got seven annas, Mr. Devidas got seven annas and Mr. Tanubhai got two annas. THE shares of the partners were subsequently changed to seven annas, five annas and four annas respectively, according to the writing dated 20th November, 1937. Mr. Devidas died on 8th July, 1940, with the result that on that day the firm was dissolved. A notice dated 11th September, 1940, was published in the government Gazette and other newspapers notifying the dissolution of the firm on 8th July, 1940. A fresh partnership agreement was entered into on 12th September, 1940, between Mr. Motichand and Mr. Tanubhai, sharing profits and loss equally with effect from 8th July, 1940.

(3.) THE first question falls into two parts. the first part is the question of construction of Section 25(3) as read with Section 26 of the Act. On behalf of the Commissioner it was urged that discontinuance of the business or profession or vocation must mean a cessation of that business, as the word discontinuance is ordinarily explained in dictionaries. It was contended that a change in the constitution of the firm did nor amount to a discontinuance. it was argued that if the owner of a business was A and he sold the business to B the business still continued, and although relief may be available under Section 25(4), on the ground of the assessee succeeding to the business of the previous assessee, no relief could be granted under Section 25(3), because for that purpose the relevant question is has the business been discontinued ? THE argument is that under Section 25(3) the point for consideration is not, who is the assessee, who was doing business, but has the business continued or discontinued. In In re P.E. Polson, our High Court has held that if a business carried on by A was sold to B, if A had paid income-tax under the Act of 1918 he was entitled to get relief under Section 25(3). That case has been doubted in O. Rm. M. SP. S.V. Meyyappa Chettiar v. Commissioner of Income-tax, Madras. I appreciate that there is force in the reasoning of the Madras case. We are however bound by the decision in Polsons case and it is possible to decide the present reference without going into this question of law. I do not propose to discuss it any more.