COMMISSIONER OF INCOME-TAX, BANGALORE vs. M/S. R. HANUMANTHAPPA AND SON

CIVIL APPEAL No. 704/1968Supreme Court[1972] 1 S.C.R. 9410 August 1971Bench: 2 JudgesAuthor: K.S. HEGDE, A.N. GROVER COMMISSIONER OF INCOME10 pages
AI SummaryAllowed

What did the Supreme Court hold?

The Supreme Court held that there was no discontinuance of the business within the meaning of Section 25(3) of the Mysore Income-tax Act, 1923. The Court reasoned that the requirement of Section 25(3) is the factual cessation of the business itself, not merely a change in its ownership. In this case, the business continued to operate, with the partnership firm stepping in as the successor owner. The partnership deed explicitly stated the intention to continue the family business. Therefore, the change from HUF ownership to partnership ownership constituted a change of owner, not a discontinuance of the business. The Court also held that an appeal lay to the Supreme Court. Despite the matter relating to a pre-Constitution period and the Mysore High Court's prior finality under the Mysore Act, the amendment of the Indian Income-tax Act, 1922, by the Finance Act, 1950, extended its application to the whole of India (except Jammu & Kashmir). Furthermore, the appeal was brought by special leave under Article 136(1) of the Constitution, which has wide scope to cover any judgment from any court or tribunal in India. The High Court's answer in favor of the assessee was set aside, and the question was answered in favor of the Revenue.

What were the facts?

The Hindu Undivided Family (HUF) of R. Hanumanthappa and Son, engaged in a cotton business, underwent partition on November 2, 1948. Subsequently, on November 22, 1948, the erstwhile coparceners, along with R. Gopamma, formed a partnership firm named R. Hanumanthappa & Son, Cotton Merchants. The partnership deed stipulated that the firm would carry on the business as a successor to the business originally conducted by the HUF. The HUF's assessment for the assessment year 1949-50 was completed on December 29, 1949. The Income-tax Officer sought to reopen this assessment under Section 34 of the Mysore Income-tax Act, 1923, raising an additional demand. The assessee claimed exemption under Section 25(3) of the Mysore Act, arguing that the business was discontinued after partition. The Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal rejected this claim, citing the succession clause in the partnership deed and the transfer of business assets. The High Court, however, ruled in favor of the assessee.

What were the issues?

1. Whether there was a discontinuance of the business within the meaning of Section 25(3) of the Mysore Income-tax Act, 1923, when a Hindu Undivided Family's business was continued by a partnership firm formed by its erstwhile coparceners. Assessee's contention: The assessee argued that after the partition of the HUF, the business was discontinued, entitling them to exemption under Section 25(3) of the Mysore Act. They relied on the principle that a partition of a HUF breaks the integrity of the business, leading to its cessation. Revenue's contention: The Revenue contended that there was no discontinuance of the business as contemplated by Section 25(3). They pointed to the partnership deed's clause stating the firm would carry on as a successor to the HUF's business and the transfer of business assets, indicating continuity. 2. Whether an appeal lay to the Supreme Court from a judgment of the Mysore High Court arising out of a pre-Constitution matter under the Mysore Income-tax Act, 1922, especially after the introduction of the Indian Income-tax Act, 1922, and its amendment by the Finance Act, 1950, and in light of Article 136(1) of the Constitution.

Which sections of the Income-tax Act were involved?

Section 25(3),Section 34

AI-generated summary — verify with the full judgment below

94 COMMISSIONER OF INCOME-TAX, BANGALORE v. M/s. R. HANUMANTHAPPA AND SON August IO, 1971 A [K. S. HEGDE AND A. N. GROVER, JJ.] B Mysore Income-tax Act, 1923, s. 25(3)-Hindu undivided/amity carrying on family business-After partition, the same copar- ceners with another formed partnership and was carrying on the same business-Whether discontinuance of the family busi- ness within the meaning of s. 25(3)-Mysore Income-tax Act, C 1922-Finance Act, 1950-Whether appeal lay from a judgment of Mysore High Court arising out of pre-constitution matter- Interpretation of Art. 136(i) of the Constitution.

After the partition of a Hindu undivided family the coparceners formed into a partnership and carried on the same business which was being done by the Hindu undivided family. D A clause in the deed of partnership was that "the partnership shall carry on as a successor to the business originally carried on by the Hindu undivided family".

The assessment of the Hindu undivided family for the year I 949-50 was completed on December 29, 1949. The previous assessment year was November 30, 1947 to November I, 1948. This assessment was sought to be reopened under s. 34 of the

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 34

All 288 judgments and leading authorities on Section 34 →

Recent GST High Court judgments

Search GST case law →