COMMISSIONER OF INCOME-TAX Vs. P E POLSON

JUDGEMENT

(1.) THIS appeal, which is brought from a judgment of the High Court of Judicature at Bombay, raises a difficult question of Indian income-tax law upon which different views have been expressed by the High Courts of Bombay and Madras.

(2.) THE question can be briefly stated. It is whether the word "discontinued" in Section 25 (3) of the Indian Income-tax Act, 1922 (hereinafter called "the 1922 Act"), as amended by the Indian Income-tax (Amendment) Act, 1939 (hereinafter called "the amending Act"), means only a complete cessation of the business or whether it also includes the case of discontinuance of the business by the person formerly carrying it on as the result of the transfer or assignment of that business to another person who thereafter carries it on. In the case under appeal the High Court at Bombay (Beaumont C. J. and Kania J.) has given the wider meaning to the word : in Meyyappa v. Commissioner of Income-tax, Madras [1944] Mad. 166, the High Court at Madras has given it the narrower meaning.

(3.) IN May, 1939, the INcome-tax Officer; Companies Circle, Bombay, issued a notice to the respondent under Section 22 (2) of the 1922 Act for the assessment year 1939-40, and on August 4, 1939, the respondent made a return which contained an item of Rs. 1,64,726 in respect of income from his business for the previous year, i. e. the year 1938. Before any assessment was made he submitted a revised return showing "nil" under all items. As his covering letter showed he based his return upon a claim to be entitled to the benefit of the provisions of Section 25 (3) of the 1922 Act as amended by the amending Act. This claim was rejected by the INcome-tax Officer who on November 29, 1939, passed an order under Section 23 (3) of the 1922 Act assessing the respondent to tax on a total income which included the item of Rs. 1,64,726 in respect of the business. The respondent appealed to the Appellate Assistant Commissioners who by an order passed on March 30, 1940, dismissed the appeal. The respondent thereupon applied to the Commissioner of INcome-tax, Bombay, Sind and Baluchistan, to review the assessment or to refer to the High Court for its decision the following questions of law: 1. Whether on the facts of the case your petitioner (the respondent) is entitled to the benefit of Section 25 (3) of the INcome-tax Act? 2.Whether in view of the provisions of the said Section 25 (3) no tax is payable by your petitioner (the respondent) in respect of his income from business of Poison Manufacturing Company for the calendar year 1935 liable to assessment in respect of the financial year 1939-40.