Judgement

S. R. DAS J.: This is an appeal from the judgment and order pronounced on 20-6-1951 by a Bench of the Calcutta High Court on a reference made by the Income-tax Appellate Tribunal under S. 66 (1), Income-tax Act read with S. 21, Excess Profits Tax Act. whereby the High Court answered in the affirmative the following question :

"Whether on the facts and circumstances of this case there is a change in the persons carrying on the business within the meaning of S. 8 (1), Excess Profits Tax Act, 1940, with effect from 14-4-1943, when the business, which had previously been carried, on in partnership between two Dayabhaga Hindu Undivided Families, was carried on by a partnership between the separated male members of the two families?"

2. The controversy arose at the time of the assessment of the appellant firm to Excess Profits Tax for three chargeable accounting periods, namely, 14-4-1943 to 13-4-1944, 14-4-1944 to 13-4-1945 and 14-4-1945 to 31-3-1946. During the aforesaid chargeable accounting periods the status of the assessee was that of a firm registered under S. 26-A. Income-tax Act.

In the chargeable accounting period ending 13-4-l944 there was no profit in excess of the standard profit but there was a deficiency of Rs. 12,804. The assessee claimed that the total deficiencies amounting to over Rs. 84,000 carried forward from previous years up to the chargeable accounting period ending 13-4-1943 should be added to the sum of Rs. 12,804/- and the aggregate amount should be carried forward under S. 7, Excess Profits Tax Act. The Excess Profits Tax Officer rejected this contention on the ground that there had been a change in the persons carrying on the business and the old business should be deemed to have been discontinued and a new business to have commenced within the meaning of S. 8, Excess Profits Tax Act, and carried over only Rs. 12,804/-.

In the chargeable accounting period ending 13-4-1945 there was a profit of Rs. 88,652/- over the standard profit and the Excess Profits Tax Officer allowed only Rs. 12,804/- as the deficiency brought forward and assessed the firm for the nett excess of Rs. 75,848/-. He rejected the contention of the assessee that the deficiency which accrued before 14-3-1943 should also be deducted from the excess Profits of this chargeable accounting period. In the chargeable accounting period ending 31-3-1946 no deduction whatever was allowed on account of the deficiency that was said to have accrued up to the chargeable accounting" period ending 13-4-1943.

3. There were three separate appeals by the assessee to the Appellate Assistant Commissioner against the three orders of the Excess Profits Tax Officer. The Appellate Assistant Commissioner confirmed the assessments and dismissed the appeals. Further appeals were taken to the Income-tax Appellate Tribunal. By an order made on 25-7-1949 the Appellate Tribunal dismissed all the three appeals. Thereupon three applications were made before the Appellate Tribunal under S. 66 (1), Income-tax Act, read with S. 21. Excess Profits Tax Act.

The Appellate Tribunal thereupon drew up a statement of case and submitted for the opinion of the High Court the question referred to above. The High Court, in agreement with the Appellate Tribunal, answered the question in the affirmative. Hence the present appeal under a certificate granted by the High Court under S. 66-A (2). Income-tax Act:

4. According to learned counsel who appears in support at this appeal Kshetra Moban Sadhukhan and, Sannayasi Charan Sadhukhan who were two brothers governed by the Dayabhaga School of Hindu Law separated from each other many years ago. The two separated brothers, as Kartas of their respective families, started a business in partnership under the name and style of Kshetra Mohan Sadhukhan and Sannyasi Charan Sadhukhan, each having an eight-annas share in the profit and loss thereof. Sannyasi Chraran Sadhukhan died in 1932 and his Sens were admitted into the partnership and the busin