KOTESWARA RAO B Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Hyderabad Bench has referred the following question for the opinion of this Court under s. 66(1) of the Indian IT Act (herein-after called the Act for the sake of convenience) namely :

(2.) THE material facts leading up to this reference may be shortly stated. Two persons, by names Kotaiah and Veera Sarabhaiah, entered into a partnership in 1915 and carried on the business of manufacturing expellers, spare, parts etc. under the name and style of "Shanker Foundry". THE only document in support of the partnership was made on 30th Nov., 1938. That document recited, inter alia, that the shares of the two partners would be equal until the business was discontinued. As Kotaiah, one of the partners, was not maintaining sound health, it was decided between them that they should convert their business into that of a private limited concern. With this object in view, they took steps to promote and float a company called "THE Shanker Foundry and Machinery Manufacturing Co. Ltd." It was agreed that the factory lands and buildings, machinery, furniture, implements, etc. and the goodwill of the business should be sold to the limited concern for a consideration of Rs. 2,00,000 to be received in cash. While so, Kotaiah made a will on 12th May, 1946 bequeathing all his properties including his interest in the partnership to his wife, Durgamba. THE next day the testator died leaving behind him his wife, Durgamba, with considerable movable and immovable properties and his business. THE relevant terms of the will are set out hereunder :

(3.) THE assessee carried the matter in appeal to the AAC contending that the duration of the broken period for which the firm was entitled to the benefit of s. 25(4) was from 1st April, 1946, to 5th July, 1946, the date of sale of the business of the company to the newly floated company and not from 1st April, 1946, to 13th May, 1946, the date of the death of Kotaiah. THE AAC confirmed the order of the ITO rejecting the plea of the assessee that the succession to the business of the firm of Kotaiah and Veera Sarabhaiah occurred only on 5th July, 1946.