Pursuant to the instructions given by G. A. Chambers, M s. Fraser Ross, the auditors, prepared a balance sheet of the Chambers Co. and also the individual accounts of G. A. Chambers and K. H. Chambers.
Thereafter the son was carrying on the business of Chambers Co. in his own name, in the same pre mises, taking over all the companystituents of Chambers Co., using the same companyes and trade marks and the important members of the staff of the Company.
5,95,433 12 3K. H. Chambers was given assets valued at Rs.
G. A. Chambers wrote to the Liverpool and London and Globe Insurance Company, Calcutta, wherein he stated We companyfirm our companyversation with your representative that inasmuch as we have transferred all our export business to Mr. K. H. Chambers, who is number running the business in his own name and at his own risk and responsibility, we shall be pleased if you will transfer the agency of your firm to him.
The change of management did number bring about any favourable turn in the affairs of the business.
Hence the appeal.
It is true that the name of Chambers Co. was retained by the father, but all the advantages of that name, as aforesaid, were transferred to the son.
But the son was anxious to companytinue the business independently.
In July 1932, the son was going to foreign companyntries, presumably in companynection with his business.
Appeal by special leave from the judgment, dated December 21, 1960 of the Madras High Court in Case Referred No.
He, therefore, suggested to his son that the Chambers Co. companyld be wound up and that if he chose he companyld have the goodwill of the said Company so that he might obtain some advantage from the goodwill and companynections of Chambers Co., either by interesting financially one or other of the firm companynections or by offering to work on a companymission basis.
40,000 in the business companyducted by Chambers Co. and was actually managing the same.
This letter shows that from December 1, 1932, K. Chambers would run the export business and that the accounts, of G. A. Chambers in the Chambers Co. would be transferred to the accounts of Chrome Leather Co. From that date the export business which K. H. Chambers was running earlier as manager would be companytinued by him in his own name that is, instead of as manager, as its own proprietor.
The Income tax Officer, by his order, dated March 18, 1949, held that K. H. Chambers did number take over the business of his father carried on in the name of Chambers Co. as a whole running companycern and, therefore, the assessee was number entitled to relief under s. 25 4 of the Act.
On December 5, 1932, G.A. Chambers asked his auditors, M s. Fraser Ross, to close the accounts of Chambers Co. and send the balance sheet, venture and profit and loss accounts for 8 months ending November 30, 1932, together with the schedule of accounts taken over by H. Chambers showing the amount due to him from K. H. Chambers.
Some months prior to July 7, 1932, K. H. Chambers invested a sum of Rs.
The High Court answered the aforesaid question in the negative in favour of the assessee it held that the son succeeded to the business of his father after November 1932 and, therefore, there was succession within the meaning of s. 2 5 4 of the Act.
On a further appeal, the Income tax Appellate Tribunal came to the same companyclusion and found that the identity of the business carried on by the father was lost in the hands of the son, as the entire business was number transferred to him.
private companyes and trade marks and the important sections of the staff that belonged to Chamber Co. On May 23, 1933.
From the aforesaid documents and admissions the following facts emerge G. A. Chambers was companyducting two businesses, one under the name and style of Chambers Co. and the other under the name and style of Chrome Leather Company.
The business was running at a loss and the father was number anxious to companytinue the business and, therefore, he made some alternative suggestions to his son.
136 of 1956.
The said Chambers Co. was an assessee under the Indian Income tax Act, 1918.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
D. Kharkhanis and R. N. Sachthey, for the appellant.
Ganapathy Iyer, for the respondent.
One G. A. Chambers was carrying on two businesses, one in the name and style of Chambers Co. and the other in the name and style of Chrome Leather Company.
The first business was companycerned with export of hides, skins and mica, insurance and shipping brokerage.
The Chambers Co. was doing ,export business.
5,67,485 10 2 and liabilities valued at Rs.
1106 of 1963.
in that letter G. A. Chambers informed the auditors that from December 1, 1932, K. H. Chambers would be running the export business separately in his own name that he had asked Chambers Co. to close their accounts upto the end of November and transfer all such accounts to Messrs. Chambers and Company relating to G. A. Chambers to us so that we may run Messrs. Chambers and Companys account at Chromepet.
On appeal, the Appellate Assistant Commissioner agreed with the Income tax OfficeR and held that the business carried on by K.H. Chambers was number the same business which was originally assessed under the old Act of 1918 in the hands of his father.
On July 8, 1932, the son replied to the father to the effect that he would prefer to start right afresh in his own name or in the name of Chambers Co. he also suggested that he companyld get a place for less rent and use a smaller staff and requested his father to allow him to use the existing private companyes.
The appellants case is that towards the end of 1932 G. A. Chambers transferred the business to his son, K. Chambers, and that after the said transfer, K. H. Chambers carried on the business in his own name till January 1, 1948, when the business was taken over by a limited companypany.
The Judgment of the Court was delivered by Subba Rao, J. This appeal by special leave raises the question of the applicability of s. 25 4 of the Indian Income tax Act, hereinafter called the Act, to the assessment in question.
60,000 was invested by him the father , which he companyld number afford to risk, the business companyld number be companyducted.
The son was managing the business, but number with any success.
The changeover was effected after the accounts were audited and the balance sheet was prepared by the Companys auditors and the father took over the old liabilities and assets sufficient to discharge them and the business was handed over to the son.
40,000 invested by him in the business would run out, and that unless Rs.
Ultimately the Tribunal referred the following question to the High Court of Madras for its opinion under s. 66 t of the Act Whether on the facts and in the circumstances of the case the Tribunal was right in law in refusing relief under Section 25 4 of the Indian Income tax Act to the assessee.
As the business was in a bad way, in or about 1931 G. A. Chambers handed over the management of the said business to his son, K. H. Chambers.
On July 7, 1932, before the son left India, G. A. Chambers wrote a letter to him informing him that by the end of August 1932 the sum of Rs.
This letter was signed by G. A. Chamebrs on behalf of the Chrome Leather Company.
For the assessment year 1948 49 K. H. Chambers claimed relief under s. 25 4 of the Act on the ground that the business had been assessed under the old Act of 1918 when it was carried on by his father, G. A. Chambers, and that the said Chambers transferred the business to him towards the end of 1932.
The balance sheet shows that A. Chambers was given assets valued at Rs.
55,214 2 3 and liabilities valued at Rs.
It is also companyceded by the Department that G. A. Chambers utilized his good offices in getting the Liverpool and London and Globe Insurance Company to transfer the agency of that companypany to Chambers Co. run by K. H. Chambers.
