JITTANRAM NIRMALRAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER S. 66(1) of the Indian IT Act the Tribunal had referred the following question of law for the determination of the High Court, viz., "whether on the facts and in the circumstances of this case the Tribunal was right in holding that there was neither a discontinuance in nor any succession to the appellant's business as contemplated by S. 25(3) and S. 25(4) of the IT Act."

(2.) THE material facts leading up to this reference are not in dispute. The assessee was a firm named Jittanram Nirmalram constituted of four partners, viz., Rai Bahadur Ramchandram, Lakshmi Narain Bhadani, Vishnu Prasad Bhadani and Bhagwandas Bhadani. It is stated that on 9th Nov., 1942, Bhagwandas gave a notice severing his connection with the firm and commencing a new business of his own known as Nirmalram Hariprasad. At the time when Bhagwandas gave the notice and severed his connection his share in the profits and assets was computed to be over one and a half lacs which amount was paid to him partly in cash and partly by allotting to him a cloth shop previously carried on by the firm. It is conceded that after 9th Nov., 1942, the firm continued to deal in grain, hardware, sugar, petrol, kerosene oil and also carried on money -lending business as before. The assessee claimed before the IT Department that on account of the circumstance that Bhagwandas had severed his connection with the firm there was a discontinuance of business within the meaning of S. 25(4) of the IT Act. This argument was rejected by the ITO. The assessee made an appeal to the AAC and also to the Tribunal. His appeal was unsuccessful. At his instance the Tribunal has referred the question of law which has been formulated above.

(3.) THE High Court was not however satisfied that the statement of the case was sufficient to enable it to determine the question. For this reason the High Court referred the case back to the Tribunal to make a further statement on two questions of fact, viz., (1) whether the business of the firm Jittanram Nirmalram as constituted before 9th Nov., 1942, was at any time charged under the provisions of the Indian IT Act of 1918 (Act VII of 1918) ; and (2) whether upon the facts proved the firm Jittaram Nirmalram was dissolved on 9th Nov., 1942, as a result of the severance of Bhagwandas Bhadani, or, in the alternative, whether there was no dissolution of the partnership but Bhagwandas Bhadani merely retired from being a partner of the firm.