JITTANRAM NIRMALRAM Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF PATNA
COMMISSIONER OF INCOME TAX
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RAMASWAMI,SARJOO PROSAD,JJ. -
(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.
When the case first came before the High Court Mr. Jain on behalf of the assessee conceded that he would not press the argument that there was discontinuance of business within the meaning of
s. 25(3) of the IT Act. But the learned counsel laid stress on the argument that there was
succession within the meaning of S. 25(4) and the IT authorities have misapplied the law in
refusing to grant relief to the assessee under S. 25(4) of the IT Act.
(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.;
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