LexCOMMISSIONER OF INCOME-TAX, PUNJAB, PATIALA versus R. B. JODHA MAL KUTHIALA
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• ' .. • A COMMISS101'1~R OF INCOME-TAX, PUNJAB, PATIALA B c D E v .. R. B. JODHA MAL KUTHIALA November 19, 1965 [K. SUBBA RAO, J. C. SHAH ANDS. M. SIICRI, JJ.] Indian Income Tax Act 1922, s. 25(4)-Benefit under-Business assessed under Indian Income-tax Act, 1918-Firm dissolved on March 31, 1939 and new firm took over business from April 1, 1939-Act 7 of 1939 came Into force from April 1, 1939-Firm whether carried on b,,.,lne,. at commencement of Act 7 of 1939. A Hindu undivided family was assessed to tax under the Indian Inrome-tax Act 1918 in respect of its business, inter alia, in timber. In 1934 there was dissolution of the family and five of its members entered into a partnership to carry on the business. This firm was dissolved on March 31, 1939 and its accounts were settled on and up to that date. The timber busine~ of the dissolved firm was taken over by the assessee firm. An instrument of partnerhip fur the new firm was drawn up on June 29, 1939 in which the, facts relating to the dissolution of the earlier firm were also recited. The new firm-the assessee-was also dissolved in March 1943. In assessment proceedings for 194344 the assessee claimed benefit under s. 25(3) or in the alternative o. 25(4) of the Indian Income-tax Act, 1922. 'The claim was rejected by the assessing and appellate authorities but in reference, the High Court allowed the claim under s. 25(4). The O>mmissioner of Income-tax, with certi- ficate, appealed to the Supreme Court. The material question for determination was whether the assessec wa.• carrying on business at the commencement of Act 7 of 1939 so as to be entitled to the benefit under s. 25 ( 4). HELD: The Indian Income-tax (Amendment) Act 7 of !939 was brought into force on April 1. 1939. Sec'.ion 5(3) of the General Clauses Act (10 of 1897) provides that unless the contrary is expressed, F a Central Act or Regulation shall be construed as coming into being on the expiration of the day preceding its commencement. Act 7 of 1939 must therefore be deemed to have come into operation at a point of time immediately on the expiration of March 31, !939. [648 D-EJ G H Whether the assessee was carrying on business at the point of time which Act 7 of 1939 came into force had to be decided from the recitals in the partnership deed executed by the respondents on June 29, 1939. The recitals in the instrument that the accounts were settled up to March 31, 1939 and that the erstwhile partners had become rnparaie would imply that the firm formed in 1934 did not do business after March 31, 1939. The assessee v.'as cons 1ituted to carry on the timber business allotted to it at the time of dissolution from April I, 1939. The timber business was an old and running business and an intention to maintain continuity of the business and its transaction':.\ may reasonably be attri- buted to the assessec. It must therefore be held that the assessee com- menced doing business immediately after the dissolution of the firm of 1934 become effective. The business of th.at firm continued up to the midnight of March 31, 1939, and immediately thereafter the business of the assessec commenced. [649 E-H; 650 Al 046 9UPlll!ME COUJ.T REPORTS [1966] 2 S.C.R. · The new partnership therefore came into being at the precise period A of time at which Act 7 of 1939 came into force and it could not be said that the assessee was not carrying on business at the commencement of that Act. The High Court was therefore right in holding that the as- sessee was entitled on the dissolution of the firm in March 1943 to the benefit of s. 25 ( 4) of the Indian Income-tax Act, 1922. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 95 of 1964. B Appeal from the judgment and order dated April 14, 1961 of the Punjab High Court in Income-tax Reference No. 23 of 1958. S. T. Desai, R. Ganapathy Iyer, Gopal Singh, B.R.G.K. Achar C and R. N. Sachthey, for the appellant. A. V. Viswanatha Sastri, T. A. Ramachandran, 0. C. Mathur for the respondent. The Judgment of the Court was delivered by Shah, J. Hakam Mal Tani Mal a Hindu undivided family D was assessed to tax under the Indian Income-tax Act, 1918, in respect of income from business, inter alia, in timber at Abdulla- pur. In 1934 there was a partition of the Hindu undivided family, and five members of that family entered into a partnershlp to carry on in the name of M/s Hakam Mal Tani Mal the b
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