PATNA HIGH COURT

                                              Hanutram Bhuramal

                                                         Vs

                                        Commissioner of Income-Tax

                                                 (Ramaswami, J.)

                                                   31.01.1938

                                                  JUDGMENT

Ramaswami, J

1. This is the statement of a case by the Commissioner of Income-tax in the matter of an
assessment made upon a joint family in respect of a business carried on by them. The material
facts may be very shortly stated. The family are the descendants of one Chaturbhauj who left two
sons. The eldest son left three sons the eldest of whom was one Nemchand. From the younger
son was descended one Bhuramal who had, in turn, two sons Sohan Lal and Puranchand. During
the year of assessment Nemchand dropped out of the family business and became separate from
the other members and ceased to have anything to do with the business. The remaining members
continued to carry on the family business. A great deal of discussion has taken place before us as
to whether the business terminated or not. The phrase discontinuance of business is apt to be
used in an ambiguous sense. Business may change hands; a partner may cease to be a partner, the
business being carried on by his co-partners; but such events do not constitute a discontinuance
of the business in the sense meant in Section 25 of the Income-tax Act. Such events are merely a
change in the ownership of the business. The finding of fact concerning which there can be no
dispute was that on the disconcerning which there can be no dispute, was that on the
disappearance of Nemchand the business continued in the hands of the other members of the
family.Now, the first question of the Commissioner which we have to answer is whether in the
circumstances of this case that assessment was rightly made on the basis of a Hindu undivided
family. This question in part depends upon whether the business was the same business after as
before the elimination of Nemchand or whether it was a different business, and that is a question
of fact which was decided by the Assistant Commissioner and it is submitted by the
commissioner to have been so decided as a question of fact and the Commissioner rightly
contends that it is merely a question of fact. But even in the circumstances the matter is not open
now, whether it be a question of fact or a question or law, because the point was not raised before
the Assistant Commissioner. The proper answer, in my opinion to the direct question whether in
the circumstances of this case the assessment was rightly made on the basis of a Hindu undivided
family should be in the affirmative. As a matter of fact, under proper construction of the Act the
present members of the family are really liable for the whole of the year under assessment in
respect of the tax payable for that year; but the department has charged them, very reasonable
only with the tax for the period after disappearance of Nemchand. With this question however,
we are not concerned.The second question submitted to us relates simply to one item of the
accounts. It would seem that some few years ago one Nasiruddin Ahmad became indebted to the
assessees business in respect of a sum of Rs. 1,663. The account being kept on the mercantile
system, this debt has been brought forward from year to years and has been treated as an asset
bearing interest and income tax has been charged upon it. In respect of the year previous to the
year of assessment it was so treated. The department, however, says that whereas an attempt has
now been made in respect of the year of assessment to wipe off the debt as bad had irrecoverable
it should have been written off and treated as bad and irrecoverable in the previous year of
assessment when it was in fact treated by the department as a still subsisting debt and as an item
concerning the profits of the business it was treated as true, good and subsisting. It is rightly
contended by the assessee that such treatment is inconsistent. After all the department should
treat a continuing business with a continuing and consistent system of treatment of items of
account and the principles which are applicable to such an item of account and such a method of
treatment of accounts in a consistent manner are explained in the case of Bansidhar v.
Commissioner of Income-tax Bihar and Orissa (I.L.R. 13 Patna 101), the remarks at page 105
being the passage applicable. In my opinion the second question which is whether the debt due
from Nasiruddin Ahmed of Rs. 1,663 is an admissible deduction in the year of assessment should
be answered in the affirmative. This concludes the matters with which we have to deal.The
assessee has been successful in respect of a minor question and has been unsuccessful of the
main question. We, therefore, deem it right to order that the assessee shall pay to the department
two thirds of the costs with which it should otherwise be saddled and as the nearest
approximation to this order we direct that he pay to the department the sum of six gold mohours.

Order accordingly.