M/ S. BADRI PRASAD JAGAN PRASAD versus COMMISSIONER OF INCOME TAX, U.P., LUCKNOW

Citation: [1985] SUPP. 2 S.C.R. 879 · Decided: 20-09-1985 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

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879 
M/ S. llADRI PRASAD JAGAN PRASAD 
V• 
COMMISSIONER OF INCOME TAX, U.P., LUCKNOW 
SEPrEM!lER 20, 1985. 
[V.D. TUUAPURKAR AND SABYASACHI MUKHAR.Jl, JJ.] 
Income Tax Act, 1922, s.25(4) - Hindu undivided family -
carrying on business - Assessed under 
Act of 
191~ -
Partial 
partition of family on 11th October, 1948 -
Partnership firm 
succeeding family business on 12th October, 1948 - Succession -
When takes place - Intention to carry on business ~ Relevancy of 
- Assessee whether entitled to relief under s. 25(4). 
The 
Assessee, 
a Hindu undivided. family, 
carrying on 
business was assessed under the Indian Income Tax Act, 1918. In 
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the assessment year 1949-50 the assessee contended that there was 
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partial partition of the family on 11th October 1948 and various 
businesses owned by the family were divided through entries made 
in the account books. A partnership firm was constituted to carry 
on those businesses and it succeded the family. The assessee 
filed an application before the Income-tax Officer claiming the 
benefit of s. 25(4) of the Act, which was rejected. 
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On appeal, the Appellate Assistant Commissioner set aside 
the order and called for a remand report. The remand report set 
out that the partnership firm succeeded to the business of the 
family on the 12th October, 1948. The ·Appellate Assistant Commis-
sioner held that as the succession took place on 
a day of the 
previous year relevant to the assessment year 1950-51 the claim 
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co11ld not be considered in respect of the assessment year 
1949-50. 
The assessee's appeal to the Tribunal was dismissed. 
The High Court, on the Reference made to it, held that 
there was a definite finding by the Tribllllal that succession took 
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place on 12th October 1948, that the date marked the c011111encement 
of the previous year relating to the assessment year 1950-51, 
that no tax was chargeable for any profits that might have 
accrued on 12th October, 1948, the date on which ·the succession 
took place, and that the Tribunal was right in holding that the 
assessee was not entitled to the benefits of s. 25(4) in the year 
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1949-50 but he could avail of that benefit in the year 1950-51. 
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880 
SUPREME COURT REPORTS 
[1985] SUPP.2.s.c.R. 
Allowing the appeal to this Court, 
HELD: 1. The assessee was entitled to relief under s. 25(4) 
of the •Income Tax Act, 1922 in the assessment year 1949-50. 
[897 CJ 
2. Section 25 sub-a. (1) dealt with the case of a 
business 
which was discontinued and which had not been suojected to double 
taxation having paid tax under the provisions of the Indian 
Income Act, 1918, and that the provisions of sub-a. (1) was 
that 
if a business was discontinued in the middle of a year, then the 
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business which was discontinue.d had to pay tax both with re1;ard 
to the whole of its previous year and also for the broken period 
of the year of assessment. The scheme of the section seems to be 
that instead of the business·· being assessed again for a broken 
period, the business should pay tax not only for the previous 
year which it ordinarily would do, but also for the additional 
period being the period up to its discontinuance. Sub-a. (4) 
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dealt with a business which had paid tax under the Indian Income 
Tax Act, 1918, and that the sub-section dealt not so much with 
the mode of taxing a business which was discontinued as with 
giving relief to a business from double taxation. It dealt with a 
situation where one business was succeeded by another, and the 
first relief to which the business which ceased to continue and 
which had been succeeded by another, was entitled, was that no 
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tax should be payable by the first mentioned person, that is, the 
person whose business had come to an end, in respect of the 
income, profits and gains of the period between the end of the 
previous year and the date of such succession; and the second 
relief to which such person was entitled was that he might 
further claim that the income, profits and gains of the previous 
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year should be deemed to have been the income, profits and gains 
of the said period. Looking at the plain language of the section, 
it was clear that the first relief had to be claimed by the 
assessee in the year of assessment in which the said succession 
took place, and the nature of the relief was that he was not 
obliged to pay tax on that particular specific period which was 
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made up of the last date of the previous year and the

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