O RM M SP S V MEYYAPPA CHETTIAR Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This reference has been made by the Commissioner of Income-tax, Madras, in accordance with a direction given to him by this Court under Section 66(3) of the Indian Income-tax Act, 1922.

(2.) The reference involves the interpretation of Section 25(3) of the Act.

(3.) The petitioner and his brothers were members of an undivided Hindu family, and when joint the family carried on a money-lending business in India and in the Federated Malay Slates. The business was of long standing and had been assessed to income-tax under the Act of 1918. On the 2nd June, 1938, the joint status was severed. Thereafter the members of the family continued the business in the same places as partners. The financial year with which this reference is concerned commenced on the 13th April, 1938. On the 22nd December, 1939, the petitioner claimed that the income of the family from the 13th April, 1938, to the 2nd June, 1938, was not liable to be taxed by reason of the provisions of Sub-sections (3) and (4) of Section 25. The Income-tax Officer accepted the petitioner s statement that there had been a partition, but he rejected the contention that the family was not liable to pay the tax on the profits earned between the 13th April and the and June, 1938. The petitioner appealed to the Appellate Assistant Commissioner who agreed with the Income-tax Officer. The petitioner then asked the Commissioner to make a reference to the Court under Section 6.6.(2) and as the Commissioner refused to do so, the petitioner moved the Court for an order under Sub-section (3) of that section directing the Commissioner to make a reference. The Court directed the Commissioner to refer for decision the following question: