COMMISSIONER OF INCOME-TAX, MADRAS versus K. H. CHAMBERS, MADRAS

Citation: [1965] 2 S.C.R. 43 · Decided: 09-11-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed
Cited by 1 judgment(s) · see the full citation network in Lexace
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

I 
• 
43 
A 
COMMISSIONER OF INCOME·TAX, MADRAS 
B 
c 
D 
v. 
K. H. CHAMBERS, MADRAS 
November 9, 1964 
[K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI, JJ.] 
The Income-tax Act, (XI of 1922), s. 25(4)-.Succession-What is-
Finding regarding succession-High Court-Jurisdiction to review. 
Succession contemplated by s. 25 ( 4) of the Indian Income-tax Act (XI 
of 1922) involv.S change of ownership, that is, the transferor goei out 
and the transferee comes in. It connotes that the whole business is trans-
ferred. It also implies that substantially the identity and the continuity 
of the business are preserved. If there is a transfer of a business, any 
arrangement between the transferor and the transferee in respect of some 
of the assets and liabilities, not with a view to enable the transferor to 
run a part of the business transferred but to enable the transferee to run 
the business unhampered by any load of debts, or, for any other app1 o-
priate collateral purpose, cannot detract from the totality of succession. 
[49 F-H] 
Reynolds, Sons & Co. Ltd. v. Ogston H. M. Inspector of Taxes, (1929) 
IS T.C. 501, Commissioner of Income-tax, Burma v. N. N. Firm, (1934) 2 
I.T.R. 85, Commissioner of Income-tax, Burma v. AL.V.R.P. Firm, (1940) 
8 I.T.R. 531, Jittanram Nirmalram v. Commissioner of Income-tax, Bihar cl 
Orissa, (1953) 23 I.T.R. 288, Malayalam Plantations, Ltd. v. Clark (H.M. 
Inspector of Taxes) (1935) 19 T.C. 314, referred to. 
The tests crystallised by decisions have given a legal content to the 
E 
expression "succession" in s. 25 ( 4) of the Act and whether facts proved 
aatisfy those tests would be a mixed question of law and fact. The High 
Court would therefore have jurisdiction under s. 66 (!) of the Act, to 
ascertain the correctness of a finding given by the Tribunal on the question 
of succession. 
[52 DJ 
Meenakshi Mills, Madurai v. The Commissioner of Income-tax, Madras, 
(1956] S.C.R. 691, referred to. 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1106 of 
G 
H 
1963. 
Appeal by special leave from the judgment, dated December 
21, 1960 of the Madras High Court in Case Referred No. 136 of 
1956. 
N. D. Kharkhanis and R. N. Sachthey, for the appellant. 
R. Ganapathy Iyer, for the respondent. 
The Judgment of the Court was delivered by 
Subba Rao, J. 
This appeal by· special leave raises the question 
of the applicability of s. 25 ( 4) of the Indian Income-tax Act, 
hereinafter called the Act, to the assessment in question. 
One G. A. Chambers was carrying on two businesses, one i11 
the name and style of "Chambers & Co." and the other in tho 
44 
SUPREME COURT REPORTS 
[1965] 2 S.C.R. 
name and style of "Chrome Leather Company". The first business 
A 
was concerned with export of hides, skins and mica, insurauce 
and shippmg brokerage. 
The said Chambers & Co. 
was 
an 
assessee under the Indian Income-tax Act, 1918. As the business 
was in a bad way, in or about 1931 G. A. Chan1bers handed over 
the management of the said business to his son, K. H. Chambers. 
The change of management did not bring about any favourabie 
turn in the affairs of the business. The appellant's case is that 
towards the end of 1932 G. A. Chambers transferred the business 
B 
to his son, K. H. Chambers, and that after the said transfer, K. H. 
Chambers carried on the business in his own name till January 1, 
1948, when the business was taken over by a limited company. 
For the assessment year 1948-49 K. H. Chambers claimed relief C 
under s. 25 ( 4) of the Act on the ground that the business had 
been assessed under the old Act of 1918 when it was carried on 
by his father, G. A. Chambers, and that the said Chambers trans-
ferred the business to him towards the end of 1932. The Income-
tax Officer, by his order, dated March 18, 1949, held that K. H. 
Chambers did not take over the business of his father carried D 
ori in the name of "Chambers & Co." "as a whole running concern" 
and, therefore, the assessee was not entitled to relief under s. 25 ( 4) 
of the Act: On appeal, the Appellate Assistant Commissioner 
agreed with the Income-tax Officer and held that the business 
carried on by K.H. Chambers was not the same business which was 
originally assessed under the old Act of 1918 in the hands of his 
father. On a further appeal, the Income-tax Appellate Tribunal 
came to the same conclusion and found that the identity of the 
business carriec;I on by the father was lost in the hands of the son, 
E 
as the entire business
Excerpt shown. Read the full judgment & AI analysis in Lexace.