COMMISSIONER OF INCOME-TAX, MADRAS versus K. SRINIVASAN AND K. GOIALAN

Citation: [1953] 1 S.C.R. 486 · Decided: 22-12-1952 · Supreme Court of India · Bench: MEHR CHAND MAHAJAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

486 
SUPREME COURT REPORTS 
[1953] 
!962 
petitioners. In cases where the periods under the 
F . 
0-hh bli' . contracts have expired, or where the proprietors have 
i.rm 
ota 
ai-
. ) 
h. 
Jethabai Patel st1l 
to recover anyt mg from the transferees after 
and ca. 
the date of vesting, the State will be at perfect liberty 
v. 
to assert and enforce its rights standing in the 
The State of shoes of the proprietors. 
The respondent will pay 
Madhya 
the petitioners their respective costs. 
Pradesh. 
Chandra!ekhara 
Aiyar J. 
1953 
Deo. 22. 
Petition allowed. 
Agent for the .petitioners in Petitions Nos. 232, 
233, 286, 309 and 320 : Rajinder Narain. 
Agent for the petitioners in Petitions 
Nos. 350 and 351: M. S. K. Sastri. 
Agent for the petitioners in Petitions 
Nos. 319, 354 and 490: Harbans Singh. 
Agent for the respondents 
in all petitions : G. H. R~jadhyaksha. 
COMMISSIONER OF INCOME-TAX, MADRAS. 
v. 
K. SRINIVASAN AND K. GOI'ALAN. 
[MEHR CHAND MAHAJAN, DAS and BHAGWATI JJ.] 
Indian Income-tax Act (XI of 1922), ss. 2 (1), 25 (3) & (4), 
26 (2)-Fir'ni charged under Act of 1918-Acc01inting year ending 
.-l, 
on 30th June each year-Transfer of bnsiness on 1st March, 1940 
-Exemption from tax under s. 25 (4)-Period for which exemption 
ca1' be granted-"End of previoZ<s year", meaning of-Interpretation 
' 
-Directions in Inoon~e -tax Manual, value of, 
Two brothers who had been carrying on in partnership a 
business, which ha.a been assessed to income-tax under the Indian 
Income-tax Act oi 1918 and the accounting year of which was a 
period of 12 months ending on the 30th June each year, transfer• 
red the business to a limited company on the 1st March, 1940, and 
claimed in the assessment Jar the year 1940-41 that under s. 25 
(4) of the Income-tax Act, 1922, they were not liable to pay 
income-tax on the income of their business from 1st July, 1938, up 
to 29th February, 1940, a period of 20 months. The Income-tax 
authorities were of the view that exemption could be claimed only 
.J 
S.C.R. 
SUPREME COURT REPORTS 
487 
for the period from 1st July, 1939, to 29th February, 1940, a 
1952 
period of 8 months: 
Held, that the expression "end of the previous year" in jub- Commission'r of 
ss. (3) and (4) of s. 25 in the context of those sub-sections means 
Income-tax 
the end of the accounting year (a period of full 12 months) expiring 
Madras 
immediately preceding the date of discontinuance or srnl'cession · 
v 
and the assessee firm was entitled to claim exemption· from tax K. Srinivasan 
only in respect of the period from the 1st July, 1939, to the 29th and K. Gopalan 
February, 1940 . 
Ou a true construction of ss. '25 and 26, the Income-tax Offi-
cer is not empowered to make an: accelerated assessment in the 
year in which succession occurs on the profits of that year 
and prematurely assess the successor so that he may be able to 
give relief to the person succeeded. 
The exemption provided for 
ins. 25 (4) and the apportionment mentioned in s. 26 (2) have to 
be made in the assessment year in which the profits of the year 
of succession fall to be assessed under s. 3 of the Act. 
For the purposes of the charging sections of the Act the ex-
pression "previous year" is co-related to a year of assessment 
immediately following it, but it is not necessarily wedded to an 
assessment year in all cases and it cannot be said that the expres-
sion "previous year" has no meaning unless it is used in relation 
to a financial year. In a certain context it may well mean a 
completed accounting year immediately preceding the happening 
of a contingency. 
CIVIL APPELLATE 
JURISDICTION: Civil Appeal 
No. 9 of 1952. Appeal from the J udgrnent and 
Order dated 2nd January, 1950, of the High Court 
of Judicature at Madras (Satyanarayana Rao and 
Viswanatha Sastri JJ.) in .Case Referred No. 68 of 
1946. 
M. C. Setalvad, Attorney-General for India, (P. A. 
Mehta, with him) for the appellant. 
K. S. Krishnaswami Aiyangar (M. Subbaraya Aiyar 
with him) for the respondents. 
' 
1952. Decembe.r 22. The Judgment of the Court 
was delivered by 
MAHAJAN J.-'l'his is an appeal from the judgment 
of the High Court of Judicature at Madras in a 
reference made by the Income-tax Appellate Tribu-
nal under section 66 (1) of the Indian Income-tax 
Act, XI of 1922. 
488 
SUPREME COURT REPORTS 
[1953] 
1952 
For several years prior to 1939-40 ~he respondents, 
. 
.-. -. 
1who are brothers, had been carrying on in partnership 
Conun•ssioner o •h b

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