Case: Commissioner Of Income-Tax, Madras Vs. K. H. Chambers, Madras

reserved for himself some assets for the purpose of discharging the debts. He did so not for the purpose of running the same business by himself but only to help the son to carry on the same business more effectively. If so, it follows that on the facts found or admitted there is a clear case of succession in the present case.6. Learned counsel for the Revenue argued that whether there was succession or not was a pure question of fact and the High Court had no jurisdiction to question the correctness of the finding given by the Tribunal to the effect that there was no succession to the business.7. This Court in Meenakshi Mills Ltd. Madurai v. Commissioner of Income-tax, Madras, 1957-31 ITR 28 at pp. 40-41: 1956 SCR 691: ((S) AIR 1957 SC 49 at pp. 58-59) laid down the following propositions which are relevant to the question now raised before us:(a) Where an ultimate finding on an issue is an inference to be drawn from the facts found, on the application of any principle of law, there is a mixed question of law and fact, and the inference from the facts found is, in such a case, a question of law and is open to review by the Court.(b) Where the final determination of the issue does not involve an application of any principle of law, an inference from the facts is a pure inference of fact although it is drawn from other basic facts.(c) The proposition that an inference from proved facts is one of law is therefore correct in its application to mixed questions of law and fact, but not to pure questions of fact.8. In the case of pure questions of fact, the inference from proved facts being itself a question of fact can be attacked as being erroneous in law only if there is no evidence to support it or if it is perverse.9. This distinction between a question of law and a question of fact was also brought out by some of the English decisions cited at the Bar. In Bell v. National Provincial Bank of England Ltd., (1904) 5 Tax Cas 1 at pp. 10, 12 the Master of the Rolls observed:"The finding of the Commissioners upon that part of the case is this: "The Commissioners were of opinion that there was no succession within the meaning of the said 4th Rule." That is, as my brother Mathew has pointed out, not a finding in fact that there was no succession, but that the particular kind of succession which took place in this case was not a succession within the meaning of the 4th Rule. That is not a finding of fact, but a finding of law and construction based upon the fact that one existing Bank did acquire and take over, not for the purpose of extinction, but for the purpose of development, the existing business of another Bank existing in another place."So too, Mathew, L. J., stated:"No succession say, the Commissioners within the meaning of the said 4th Rule. That is the proposition of law we have to decide as distingushed from fact, and we are entitled to differ from that view."In Wilson and Barlow v. Chibbett, (1929) 14 Tax Cas 407 at pp. 412, 413 Rowlatt, J., observed:"The question was whether here there was a succession, which is a primary question of fact upon which of course, it is possible the Commissioners might take a very wrong view of the law and apply false law."The learned Judge concluded thus:"All I can say is that I do not see any way to say that I can discern any sort of error in law here in the way in which the Commissioners have dealt with the case. . . .. . . .. . . .. . . . . ."These observations imply that if correct tests are not applied in coming to a conclusion whether there is succession or not in a particular case, it can be re-opened by the High Court. In (1935) 19 Tax Cas 314, Finlay, J., after considering at some length the facts placed before him, refused to go further into the matter because the finding of succession was essentially a question of fact. But the facts in that case disclosed that the correct tests were applied and, therefore, no illegality was committed by the Commissioners.10. The said decisions did not lay down that in every case the finding of succession is one of fact. Indeed, the first two decisions clearly maintained that a finding on a question whether a succession is one within the meaning of a particular provision or whether it is vitiated by any error of law is not final. The English view is also in accord with that expressed by this Court.11. The question, therefore, is whether a finding that a person succeeded another in his business within the meaning of S. 25 (4) of the Act is a finding of fact. The expression "succession", as stated by Simon in his book on Income-tax, has acquired a somewhat artificial meaning. The cases we have considered supra and similar others have laid down some tests, though not exhaustive, to ascertain whether there is succession in a given case or not. The tests of change of ownership, integrity, identity and continuity of a business have to be satisfied before it can be said that a person "succeeded" to the business of another. Unless the facts found by the Tribunal satisfy the said tests, the finding cannot be conclusive. The tests crystallized by decisions have given a legal content to the expression "succession" within the meaning of S. 25(4) of the Act and whether facts proved satisfy those tests is a mixed question of law and fact. If so, it follows that a question of law arose out of the Tribunals order and the High Court has jurisdiction to ascertain the correctness of the finding given by the Tribunal on the question of succession.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This is an authority for the position that if a business was taken over as a going concern the mere fact that some assets, which were not required by the successor for carrying on of the business, were not transferred to him would not make it any the less a succession in law. It is not necessary to multiply decisions. Succession involves change of ownership; that is, the transferor goes out and the transferee comes in; it connotes that the whole business is transferred; it also implies that substantially the identity and the continuity of the business are preserved. If there is a transfer of a business, any arrangement between the transferor and the transferee in respect of some of the assets and liabilities not with a view to enable the transferor to run a part of the business transferred but to enable the transferee to run the business unhampered by the load of debts or for any other appropriate collateral purpose cannot detract from the totality of succession.5. In the present case, the export business of the father was carried on by the son. The whole of the business was transferred, the identity was preserved and the same business was continued. The father reserved for himself some assets for the purpose of discharging the debts. He did so not for the purpose of running the same business by himself but only to help the son to carry on the same business more effectively. If so, it follows that on the facts found or admitted there is a clear case of succession in the present case.In the case of pure questions of fact, the inference from proved facts being itself a question of fact can be attacked as being erroneous in law only if there is no evidence to support it or if it is perverse.The said decisions did not lay down that in every case the finding of succession is one of fact. Indeed, the first two decisions clearly maintained that a finding on a question whether a succession is one within the meaning of a particular provision or whether it is vitiated by any error of law is not final. The English view is also in accord with that expressed by this Court.11. The question, therefore, is whethera finding that a person succeeded another in his business within the meaning of S. 25 (4) of the Act is a finding offact. The expression "succession", as stated by Simon in his book on Income-tax, has acquired a somewhat artificial meaning. The cases we have considered supra and similar others have laid down some tests, though not exhaustive, to ascertain whether there is succession in a given case or not. The tests of change of ownership, integrity, identity and continuity of a business have to be satisfied before it can be said that a person "succeeded" to the business of another. Unless the facts found by the Tribunal satisfy the said tests, the finding cannot be conclusive. The tests crystallized by decisions have given a legal content to the expression "succession" within the meaning of S. 25(4) of the Act and whether facts proved satisfy those tests is a mixed question of law and fact. If so, it follows that a question of law arose out of the Tribunals order and the High Court has jurisdiction to ascertain the correctness of the finding given by the Tribunal on the question ofis an authority for the position that if a business was taken over as a going concern the mere fact that some assets, which were not required by the successor for carrying on of the business, were not transferred to him would not make it any the less a succession in law. It is not necessary to multiply decisions. Succession involves change of ownership; that is, the transferor goes out and the transferee comes in; it connotes that the whole business is transferred; it also implies that substantially the identity and the continuity of the business are preserved. If there is a transfer of a business, any arrangement between the transferor and the transferee in respect of some of the assets and liabilities not with a view to enable the transferor to run a part of the business transferred but to enable the transferee to run the business unhampered by the load of debts or for any other appropriate collateral purpose cannot detract from the totality of succession.