NOPRAM RAMGOPAL Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF ORISSA
COMMISSIONER OF INCOME TAX
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PANIGRAHI, J. -
(1.) THIS is a petition Under Section 66(2), Income -tax Act, against an order of the Income Tax Tribunal, Madras Branch, praying for an order calling upon the Tribunal to state a case for the petitioner and refer it
to this Court for decision. The question arising for decision, according to the petitioner, is
'whether under the facts and circumstances of the case the provisions of Schedule 5 (4) are applicable to
all the activities of a business or to those activities which suffered tax under the Income -tax Act, 1939.'
(2.) THE petitioner represented a joint Hindu family concern and was carrying on mercantile business in grains prior to 1918 and had been assessed to income -tax under the Income -tax Act, 1918. During the
assessment year 15 -4 -43 to 2 -4 -44, the joint family became separated and was succeeded by a partnership
firm consisting of the members of the family. The petitioner claimed exemption from income -tax under
Schedule 5 (4), Income -tax Act, 1939. The Income -tax officer rejected his claim, but the Appellate
Assistant Commissioner held that the provisions of Schedule 5 (4) would apply to the facts of the case
and allowed the benefit of those provisions to the petitioner in two out of the six businesses carried on by
him on the relevant date of succession. The Appellate Assistant Commissioner held that the petitioner
could get relief only in respect of those activities that were actually in existence in the year 1918 and
suffered tax under the Act of 1918, but not in respect of the additional business activities which came into
existence subsequent to that year. This view of the Assistant Commissioner was confirmed by the
Income -tax Appellate Tribunal in their order, dated 24 -11 -48. It is against this order that the petitioner has
filed the present revision petition.
The admitted facts are that the petitioner -firm had only grain business and head office business in the year 1918, when he was assessed to income -tax under these two heads. In 1922, he started the business of
salt manufacture and also established a cardboard factory. In addition, he purchased some shares in
another partnership firm started after 1922. A branch office was opened at Calcutta sometime subsequent
to that year. In 1918, assessments were being made in advance but this practice underwent a change in
1922 when it was decided to charge tax on the previous year's income. In order to prevent double taxation, relief was given to such persons as had been assessed under the Act of 1918. The Appellate
Assistant Commissioner, therefore, held that those businesses which were not in existence in 1918 had
never been assessed to income -tax and that, therefore, the petitioner was not entitled to claim any relief in
respect of the income of those businesses. The petitioner attempted to establish that he had also salt
business in 1918, but that attempt failed for want of evidence. In fact, it was found that the
salt -manufacturing business had been started only in 1926 or 1927 while the cardboard factory was
started sometime later. The petitioner was called upon to satisfy the tribunal that salt was one of the
commodities that were being dealt with by the Hindu undivided family in 1918. The books of account
produced by him in support of his case were, however, not accepted and the tribunal found that, as a
matter of fact, the petitioner did not have any dealings in salt in 1918 from which the alleged salt business
could have grown.
(3.) MR . Mohanty, learned counsel for the petitioner, contends that the Income -tax authorities and the Appellate Tribunal failed to properly appreciate the effect of the provision contained in Schedule 5 (4),
Income -tax Act, 1939. That section reads as follows:
'Where a person who was at the commencement of the Indian Income -tax Amendment Act 1931, carrying on any business, profession, or vocation on which tax was at any time charged under the provisions of the Indian Income -tax Act 1918, is succeeded in such capacity by another person, the change being not merely a change in the constitution of the partnership, no tax shall be payable by the first -mentioned person in respect of the income, profits and gains......' ;
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