KSHETR.A MOHAN-SANNYASI. CHARAN SADHUKHAN vs. COMMISSIONER OF EXCESS PROFITS TAX, WEST BENGAL.

CIVIL APPEAL No. 173/1952Supreme Court[1954] 1 S.C.R. 26820 October 1953Bench: 5 JudgesAuthor: M. PATANJALI SASTRI, SUDHI RANJAN DAS, VIVIAN BOSE, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI SUPREME COURT REPORTS9 pages
AI SummaryDismissed

What were the facts?

The assessee, Kshetra Mohan Sannyasi Charan Sadhukhan, appealed against an order of the Commissioner of Excess Profits Tax, West Bengal. The dispute concerned the assessment of excess profits tax for the chargeable accounting periods from April 14, 1943, to March 31, 1946. The assessee claimed to carry forward substantial deficiencies from previous years. The Excess Profits Tax Officer rejected this, deeming a change in the persons carrying on the business under Section 8 of the Excess Profits Tax Act, thereby discontinuing the old business and commencing a new one. This meant only a deficiency of Rs. 12,804 could be carried forward. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld this decision. The High Court, on reference, also answered the question in the affirmative, leading to this appeal.

What did the Supreme Court hold?

The Supreme Court held that the finding of the Appellate Tribunal that the partnership was between two Hindu undivided families until April 13, 1943, and between eight individual members of two disrupted families from April 14, 1943, was a finding of fact. The assessee was not permitted to go behind this finding. Consequently, there was a change in the persons carrying on the business within the meaning of section 8 of the Excess Profits Tax Act. The Court agreed with the High Court that if the assessee's case was that it was a partnership of eight persons even before April 14, 1943, and if this had been accepted by the Appellate Tribunal, no question of law would have arisen. The Court found that the question of law arose precisely because of the factual finding of a change in the constitution of the partnership. Therefore, deficiencies that occurred before April 14, 1943, could not be deducted from the excess profits of the succeeding chargeable accounting periods. The Court did not consider the argument regarding the minor attaining majority as it was rendered unnecessary by the primary finding.

What were the issues?

1. Whether, on the facts and circumstances, there was a change in the persons carrying on the business within the meaning of section 8(1) of the Excess Profits Tax Act, 1940, with effect from April 14, 1943, when the business, previously carried on by two Dayabhaga Hindu undivided families, was carried on by a partnership between the separated male members of these families. Assessee's contention: The assessee argued that even before April 14, 1943, the business was a partnership of eight individuals. They relied on certain recitals in a partnership deed dated September 19, 1943, and an application for renewal of registration dated October 19, 1943, to support this. They also raised a point regarding a minor attaining majority. Revenue's contention: The revenue contended that the Appellate Tribunal's finding that the partnership was between two Hindu undivided families until April 13, 1943, and between eight individuals thereafter, was a finding of fact. They argued that this constituted a change in the persons carrying on the business under Section 8 of the Excess Profits Tax Act, preventing the carry-forward of prior deficiencies. The revenue relied on the statement of the case by the Appellate Tribunal and the High Court's interpretation.

Which sections of the Income-tax Act were involved?

Section 8(1),Section 7,Section 26-A,Section 66(1),Section 21,Section 66-A(2)

AI-generated summary — verify with the full judgment below

268 SUPREME COURT REPORTS [1954) 1953 both under sections 10 and 12, so we refrain from C ·-. -. if deciding the point. We may, however, point out in omm"·''°"'' 0 • th . t T I"' d El . A . Incomc·tax passmg at m wo cases ata , y ro- ectric gencies, Madms' Ltd. v. Commissioner of Income-tax, Bombay(') and Gam- y. missioner of Income-tax, Bombay Presidency v. Tata Sons K 11. 111: T. T. Ltd.(') it was assumed that the managing agency is busi- 1 1 ThiayaraiaChetty ness but the point was directly decided in Inderchand " and Co. H . R G . . ,f I t U p d __ ari am v. ommissioner OJ ncome- ax, . . an G!n//am HasanJ. G.P.( 3) that it is so. 1953 Oct.

20.

For the foregoing reasons, we accept the view taken by Viswanatha Sastri J. and allow the appeals. The respondent shall pay the costs of the CommissiOner both in this court and before the High Court. Appeals allowed. Agent for the appellant: G. H. Rajadhyaksha. Agent for the respondent: S. Subra.manian. KSHETR.A MOHAN-SANNYASI. CHARAN SADHUKHAN v. COMMISSIONER OF EXCESS PROFITS TAX, WEST BENGAL. [PATAN.JALI SASTRI C.J., S.R. DAS, VIVIAN BosE, GHULAM HASAN and BHAGWATI JJ.] Excess

The order continues below.

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