Section 320 — Discontinued business. Successor to s.176 of the 1961 Act.
Section 320 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
Sub-section (1) overrides section 4 and allows the Assessing Officer, at his discretion, to charge the income from the first day of the tax year to the date a business or profession is discontinued in that same tax year, and sub-section (2) requires each completed tax year or part year in that period to be assessed separately at the rates in force for that year. Sub-section (3) obliges the person discontinuing to give the Assessing Officer notice within fifteen days. Sub-sections (4) and (5) deem sums received after discontinuance — of a business, or of a profession that ceased on cessation, retirement or death — to be the income of the recipient in the year of receipt, if the sum would have formed part of the income of the person who carried it on had it been received earlier. Sub-section (6) lets the Assessing Officer serve a notice with the requirements of a section 268(1) notice on the person assessed, on any person who was a partner of a discontinued firm, or on a company's principal officer, and treats it as a section 268(1) notice. Sub-section (7) overrides sections 268 and 280 to let him require a return within a period he thinks proper but not less than seven days, and sub-section (8) makes tax under this section additional to tax chargeable under any other provision.
Discontinuance would otherwise leave income earned in the part-year outside the normal assessment cycle and receipts arriving after closure untaxed in anyone's hands. The section accelerates the charge, taxes post-closure receipts on whoever receives them, and gives the officer shortened notice powers to reach a business that no longer exists.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time to notify discontinuance to the Assessing Officer | Fifteen days | From the discontinuance of the business or profession; the obligation is on the person discontinuing | Sub-section (3) |
| Minimum period allowed in a notice requiring a return | Not less than seven days | The Assessing Officer may fix such longer period as he thinks proper, overriding sections 268 and 280, where sub-section (1) applies | Sub-section (7) |
| Rate applied to each completed tax year or part year in the period | The rate or rates in force in that tax year | With separate assessments made for each such completed tax year or part year | Sub-section (2) |
The fifteen-day notice under sub-section (3) is a standalone duty that runs from discontinuance itself, not from the end of the year or the filing of the return. Accelerated assessment is discretionary — sub-section (1) says the income 'may' be charged in the year of discontinuance — but if it is invoked, each year and part year in the period is assessed separately at its own rates. Money coming in after the shutters are down is not tax-free: sub-sections (4) and (5) tax it in the recipient's hands in the year of receipt on the test of what it would have been in the hands of the person who carried on the business or profession. A partner of a discontinued firm or a company's principal officer can be served personally under sub-section (6), and a return may be demanded on as little as seven days' notice.
A firm discontinues its business on 10 September. Sub-section (3) obliges it to give the Assessing Officer notice of the discontinuance within fifteen days, and sub-section (1) lets him, at his discretion, charge the income from 1 April to 10 September in that same tax year instead of waiting, each completed year or part year being assessed separately at the rates in force for it. A debt of the old business recovered the following year does not escape: sub-section (4) deems it the income of the recipient in the year of receipt, because it would have been taxable had it come in before the closure. And where the section applies, a notice requiring a return may allow as little as seven days, overriding sections 268 and 280.
You meet it first as the notice of discontinuance the person must give the Assessing Officer within fifteen days, then as a notice under section 268 or 280 requiring a return at short notice, and finally in the separate assessments made for each completed tax year or part year in the period. In a discontinued firm the notice may be served on any person who was a partner at discontinuance, and in a company on the principal officer.
Any person discontinuing any business or profession shall give to the Assessing Officer notice of such discontinuance within fifteen days thereof.
See the full 1961 to 2025 concordance.