Shah, J. - (1.) Hakam Mal Tani Mal, a Hindu undivided family was assessed to-tax under the Indian Income-tax Act, 1918, in respect of income from business, inter alia, in timber, at Abdullapur. In 1934 there was a partition of the Hindu undivided family, and five members of that family entered into a partnership to carry on in the name of M/s. Hakam Mal Tani Mal the business which was originally carried on by the undivided family. Accounts of this firm were settled till March 31, 1939, and the firm was dissolved. The timber business of the firm was taken over by two partners of the firm-Gajjan Mal and Jodha Mal, who entered into an agreement of partnership to carry on the business in the name of R. B. Jodha Mal Kulthiala hereinafter called the assessee'. An instrument of partnership recording the terms of the partnership and reciting the dissolution of the earlier partnership was executed on June 29, 1939. The assessee was dissolved in March 1948.
(2.) In assessment proceeding for 1943-44 the assessee contended that the firm M/s. Hakam Mal Tani Mal was dissolved on March 31, 1939, before the Income-tax (Amendment) Act, 7 of 1939 had come into force and the first succession to the business after April 1, 1939 was in March 1943, when the assessee was dissolved and on that account the assessee was entitled to relief under S. 25 (3), or in the alternative under S. 25 (4) of the Indian Income-tax Act, 1922. The Income-tax Officer completed the assessment without giving to the assessee the benefit of sub-ss. (3) or (4) of S. 25 of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner confirmed the order holding that succession to the family firm M/s. Hakam Mal Tani Mal took place on April 1, 1939, and that firm alone was entitled to relief under S. 25 (4) and to the second succession which took place on April 1, 1943, after Act 7 of 1939 was brought into force relief under S. 25 (4) was not admissible. The Income-tax Appellate Tribunal agreed with the view of the Appellate Assistant Commissioner. Thereafter as directed by the High Court of Punjab under S. 66 (2) of the Indian Income-tax Act, 1922, the Tribunal drew up a statement of the case and submitted the following question of law for the opinion of the High Court: ''Whether in the facts and the circumstances of the case, the Tribunal is correct in law in holding that the assessee firm (R. B. Jodha Mal Kuthiala, Abdullapur Depot, Simla) was not entitled to the benefit provided in S. 25 (3) or 25 (4) of the Income-tax Act, in relation to the assessment in question - The High Court held that the assessee was carrying on business when Act 7 of 1939 was brought into operation and was on that account entitled to the benefit of S. 25 (4) of the Act. With certificate granted by the High Court, this appeal has been preferred.
(3.) Sub-section (4) was inserted in S. 25 of the Indian Income-tax Act, 1922, by the Income-tax (Amendment) Act, 7 of 1939. It provides: ''Where the person who was at the commencement of the Indian Income-tax (Amendment) Act, 1939 (VII of 1939), carrying on any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918, is succeeded in such capacity by another person, the change not being merely a change in the constitution of a partnership, no tax shall be payable by the first mentioned person in respect of the income, profits and gains of the period between the end of the previous year and the date of such succession, and such person any further claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period. Where any such claim is made, an assessment shall be made on the basis of the income, profits and gains of the said period, and if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference: Provided........;