GHANSHYAM DAS GANGADHAR vs COMMISSIONER OF Income Tax.

SARJOO PROSAD, J. - 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 March 31, 1944."

The application out of which this reference arises related to assessment of excess profits tax during the accounting year ending the of July 31, 1944. The Department held that the applicants business was discontinued on the March 31, 1944, and did not run through the whole of the accounting year. Therefore, the minimum standard profits were computed up to the March 31, 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 assessee contends that the business continued up till the end of the acounting 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 March 31, 1944; second, that there were no stocks left on that date; and, third, that all the employees were discharged before the March 31, 1944. It appears, however, that some realisations and some payments were made during the period from the April 1, 1944, to the July 31, 1944, and the accounts were settled during the period.

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 end 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 South Behar Railway Company Limited v. Commisioners of Inland Revenue 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 case in 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 also 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 earning 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 had ceased on the March 31, 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 the March 31, 1944.

Mr. Mazumdar for the assessee has referred to another decision In re Dagnall Ex parte Soan and Morley. That was a case arising under the bankrupt 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 petition was presented against her. On those facts it was held that so long as 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 completely until you have performed all the obligations that the facts of trading imposed upon you." He con tends that the collection of dues and payments of money on acco unt 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 purpose of the bankruptcy law their Lordship 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 March 31, 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 the assessee ceased to carry on any business after the March 31, 1944.

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, I do not see any useful purpose would be served in directing a remand on this account.

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 cost of this reference. The hearing fee is assessed at Rs. 250.

SHEARER, J. - I agree.

Reference answered accordingly.