CHAKRAVARTTI, J. - (1.) THIS is a reference under s. 66(1) of the Indian IT Act, r/w s. 21 of the EPT Act, by which the following question of law has been referred to this Court for its opinion :--"Whether on the facts and circumstances of the case, there is a change in the persons carrying on the business within the meaning of s. 8(1) of the EPT Act, 1940, w.e.f. 14th April, 1943, when the business, which had previously been carried on by a partnership between two Dayabhaga HUFs, was carried on by a partnership between the separated male members of the two families ?"
(2.) THE facts incorporated in the question itself are (1) that a business was being carried on by a partnership composed of two partners each of which was an HUF governed by the Dayabhaga School of Hindu law ; (2) that there was a disruption of both the families and (3) that on and after such disruption the business was carried on by a partnership composed of the members of the two quondam families. In order to decide whether in those circumstances there was a "change in the persons carrying on a business" within the meaning of s. 8(1) of the EPT Act, reference to no further facts is necessary. But in order that we may not appear to be deciding an abstract question of law, I may set out the actual facts of the case as found by the Tribunal. THEy are as follows :-- The business concerned is one carried on in the name and style of M/s Khetra Mohan Sannyasi Charan Sadhukhan. It is carried on by a firm. Upto the 13th April, 1943, the firm was a partnership constituted of two partners, one of which was the HUF, consisting of the four sons of Khetra Mohan and the other HUF, consisting of the four sons of Sannyasi Charan. The families are governed by the Dayabhaga School of Hindu law and the sons of Khetra Mohan and Sannyasi Charan were all adults. On the 14th April, 1943, there was a disruption of both the families and thereupon the said sons of Khetra Mohan and Sannyasi Charan, eight persons in all, formed themselves into a partnership of eight members and thenceforward the business was carried on by this partnership. In short there was a partnership of two Hindu undivided families followed by a partnership of members of the same families and the question is whether in those circumstances the persons carrying on the business remained the same or there was a change in the persons carrying on the business. The assessee before us is the firm composed of eight persons. It appears that in the chargeable accounting period ending on the 13th April, 1943, there was a deficiency of profits in the business. The amount does not appear from the paper-book, but we were told that it was Rs. 84,388. In its assessments for the chargeable accounting periods ending on the 13th April, 1944, the 13th April, 1945, and the 31st March, 1946, respectively, the assessee firm claimed that it was entitled to carry forward the deficiency which had occurred prior to the 14th April, 1943, and to set it off against the profits of the subsequent chargeable accounting periods. That claim was disallowed by the EPTO on the ground that since the 14th April, 1943, the business had become a new business, carried on by the individual members of the families forming themselves into a new partnership and therefore they were not entitled to carry forward the deficiency of the old firm. The decision of the EPTO was upheld on appeal by the AAC and also by the Tribunal. Thereafter, the present reference was asked for and made.
(3.) BEFORE us, an attempt was made on behalf of the assessee to go behind the findings of fact arrived at by the Tribunal and to induce us to hold that actually, even before the 14th April, 1943, the business was carried on by a partnership of the members of the two families and not by a partnership of the two families, as held by the Tribunal. If that was the true state of facts, no question of law would arise at all and the assessee ought to have obtained a reference of a question as to whether there was any evidence before the Tribunal on which it would properly hold that before the 14th April, 1943, the partners of the firm were the two families. A question of that kind appears to have been proposed in the application for a reference, but it was not referred by the Tribunal and is not before us. It appears further that it was not till the application for a reference that this question was raised for the first time in the course of a narration of "additional facts" which were said to be necessary for the purposes of the application, and the respondent CEPT naturally objected to the attempt to raise a new question. In any event, we are bound to proceed on the facts as stated in the statement of the case, on the basis of which alone the question of law referred to us had been formulated. The finding as to the constitution of the firm before the 14th April, 1943, is supported in the statement of the case by abundant materials, but it is placed beyond all doubt and controversy by the recital of the history of the firm contained in the deed of the new partnership, dt. the 28th Dec., 1944, which, the Tribunal says, was not traceable in the records at the time of the drawing up of the reference, but which the assessee produced before us. But, as I have already stated, we are not required, nor is it open to us, to examine any findings of fact and I need not therefore refer further to the evidence in the case. Turning now to the question of law referred, it has arisen because under s. 7 of the EPT Act a deficiency of profits occurring in any business in any chargeable accounting period can be carried forward to be set off against the profits of subsequent chargeable accounting periods of that business, but s. 8(1) provides that if a change occurs in the persons carrying on the business, a new business shall be deemed to have commenced the result being that the privilege of carrying forward the deficiency shall cease to be available. The latter section is in the following terms :-- "8. (1) As from the date of any change in the persons carrying on a business, the business shall, subject to the provisions of this section, be deemed for all the purposes of this Act except for the purposes of determining the amount of the statutory percentage to have been discontinued, and a new business to have commenced." Although the provisions of this clause are subject to the provisions of the other clauses of the section, it is not necessary to consider that limitation, because there is nothing in the other clauses which bears in any manner on the question we have to determine in the present case.;