Judgement

MAHAJAN J. : This is an appeal from a judgment of the High Court of Judicature at Calcutta delivered in a reference under S. 66 (1), Income-tax Act, whereby the High Court answered the question referred in the affirmative.

2. The assessee is a partnership concern. When income-tax was paid under the Act of 1918, the partnership concern consisted of three partners, Mathews, Figgies and Notley. The name of the firm was A. W. Piggies & Co., and its business was that of tea brokers. There were several changes in the constitution of the firm resulting in a change in the shares of the partners. In 1924, Mathews went out and his share was taken over by Piggies and Notley. In 1926 another partner Squire was introduced. In 1932 Figgies went out, and from 1932 to 1939 the partnership consisted only of Notley and Squire. In 1939 Hillman was brought in and the partnership consisted of these three partners. In 1943 Notley went out and the partnership business was carried on by the two partners, Squire and Hillman. In 1945 Gilbert was brought in. This arrangement continued up to 31st May 1947 when the partnership was converted into a limited company.

3. For the assessment year 1947-48 the assessee claimed that it was entitled to relief under S. 25(4) of the Act as the partnership firm had been succeeded by a private limited company. There was a provision in the partnership deed of 1939 that on the retirement of any partner the partnership would not be determined but would be carried on by the remaining partners. It appears that a fresh partnership deed was drawn up in the year 1945 when Gilbert was brought in. The partnership constituted by these three partners continued to carry on the same business that had been started when the tax was paid under the Act of 1918. From the statement of the case, it does not appear that apart from the mere change in the personnel of the partners and in their respective shares there was any actual dissolution of the firm, and any division of its assets and liabilities or a succession to its business by any outside person.

4. The Income-tax Officer disallowed the claim of the assessee on the ground that the partners of the firm in 1939 being different from the partners of the firm in1947, no relief could be given to the applicant. The Appellate Assistant Commissioner upheld this view. On appeal to the Income-tax Tribunal, this decision was reversed and relief was granted to the applicant under S. 25 (4). Before the Tribunal it was argued on behalf of the Commissioner that the partnership was nothing but an association of persons and therefore in order to get relief under S. 25 (4) of the Act the partners of 1939 must be the same as the partners of 1947 when the firm was succeeded by the company.

The Tribunal repelled this contention and held that the relief contemplated by S. 25 (4), Income-tax Act, was to be given to the business and not to the persons carrying on the business and that mere changes in the constitution of the firm had to be ignored. It was not disputed before the Tribunal that the business of the partnership firm of A. W. Piggies & Co., continued as tea brokers right from its inception till the time it was succeeded by the limited company. The Tribunal took the view that for purposes of income-tax the firm was to be regarded as having a separate juristic existence apart from the partners carrying on the business and that the firm could be carried on even if there was a change in its constitution.

5. At the instance of the appellant, the Tribunal stated a case and referred the following question to the High Court under S. 66 (1) of the Act:

"In the facts and circumstances of the case, was the firm as constituted on 31st May 1947 entitled to the relief under Section 25 (4) of the Indian Income-tax Act?"

The High Court answered the question referred in the affirmative. It upheld the view taken by the Tribunal.

6. It was contended before us that the construction placed by the High Court upon S.