Patna High Court
Ghanshyam Das Gangadhar vs Commissioner Of Income-Tax on 12 October, 1950
Equivalent citations: AIR 1951 PATNA 624
JUDGMENT Sarjoo Prosad, J.
1. The short point involved in this reference is "Whether on the facts and circumstances of the case the Tribunal was right in holding that the assessee ceased to carry on any business after 31st March, 1944".
2. The application out of which this reference arises related to assessment of excess profits tax during the accounting year ending the 31st of July, 1944. The Department held that the applicant's business was discontinued on the 31st of March, 1944, and did not run through the whole of the accounting year. Therefore, the minimum standard profits were computed up to the 31st of March, 1944, that is, for eight months, and this amount was deducted out of the profits of the chargeable accounting period, and on this basis excess profits were assessed. The assesses contends that the business continued up till the end of the accounting period. The Tribunal has come to a finding against him, and this finding is based upon certain factors mentioned in the statement of the case made by the Tribunal. The first is that it was admitted that there was no purchase or sale after the 31st March, 1944; second, that there were no stocks left on that date ; and, third, that all the employees were discharged before the 31st March, 1944. It appears, however, that some realisations and some payments were made during the period from the 1st April, 1944, to the 31st July, 1944, and the accounts were settled during the period.
3. Mr. S.K. Mazumdar for the assessee contends on the basis of this finding, namely, that there were some realisations of assets and some payments made during this period, that the business continued up to the and of the accounting period, and, therefore, the method for assessing excess profits tax as adopted by the Department was erroneous. He relies upon a decision in South Behar Railway Company, Limited v. Commissioners of Inland Revenue [1925] A.C. 476 where it was observed on the facts of that case that the company carried on business within the meaning of Section 52 of the Finance Act, 1920, and was liable to corporation profits tax. Mr. Mazumdar contends that although in the casein question the railway had been relinquished to the Secretary of State and during the period of accounting the Company was doing no more than collecting the annuities payable to the Company under a certain contract, yet it was held that the business of the Company was going on. It is to be observed that the facts in that case were entirely different. Whether the Company was or was not carrying on business would depend upon the nature of the business which the Company had to carry on. There, after the railway had been relinquished to the Secretary of State, the Company was in consideration of that relinquishment entitled to a fixed annuity to be paid half-yearly in lieu of the percentage of earnings payable under the principal contract, Therefore, it was held that the Company in collecting and declaring dividends was carrying on business during the accounting period. The case has, thus, no application to the facts of the present case. In this Case the business of the assessee was that of a cloth-dealer. Admittedly this business had ceased on the 31st of March, 1944, and there was no Sale or purchase of any stocks, and even the employees had been discharged. On these materials the Tribunal was justified in coming to a finding that the business of the assessee discontinued after 31st March, 1944.
4. Mr. Mazumdar for the assessee has referred to another decision In re Dagnall Ex parte. Soan and Morley [1896] 2 Q.B. 407. That was a case arising under the bankruptcy law. A married woman had been carrying on trade separately from her husband. She sold the business in question and shortly afterwards gave notice to her creditors that she was about to suspend the payment of her debts and then a bankruptcy petitions was presented against, her. On those facts it was held that so long her debts had not been discharged, she would be deemed to be still carrying on the trade on that date. Mr. Mazumdar very strongly relies upon certain observations of Vaughan Williams, J, which are as follows :-" It seems to me that trading is not completed until you have performed all the obligations that the fact of trading imposed upon you." He contends that the collection of dues and payments of money on account of the business were also obligations imposed upon the assessee by the trade which he had been carrying on, and, therefore, it must be assumed that because he performed these acts, the business! was continued by him. The observations made in that case have to be considered in the light of the context. For the purposes of the bank. ruptey law their Lordships assumed that the business was not closed until the debts had been discharged, and it was in that context that' the observations were made by his Lordship. Having regard to the facts found by the Tribunal, it is impossible for us to say on this reference that there was no evidence on which the Tribunal could come to a finding that the assessee ceased to carry on his business after the 31st March, 1944. Therefore, the reference in the present case has to be answered in the affirmative, namely, that on the facts and circumstances of this case, the Tribunal was justified in holding that that assessee ceased to carry on any business after the 31st March, 1944.
5. I must, however, observe that the facts stated by the Tribunal are to some extent vague and are not as full as they should have been, In any case, the material facts being there, 1 do not see any useful purpose would be served in directing a remand on this account.
6. For the reasons stated above, I would direct that the reference should be answered in the manner stated above. The Department would be entitled to the costs of this reference. The hearing fee is assessed at Rs. 250.
Shearer, J.
7. I agree.