GENTLE,J. - (1.) PRIOR to the month of March, 1938, a firm named Jaidayal Sagarmal carried on a business of jute, hemp press, oil mills and iron foundry in Benares. The applicants, Krishna Hydraulic Press Ltd., were incorporated on 3rd March, 1938, the main purpose of the company being to take over and purchase as a going concern the business of Jaidayal Sagarmal together with old land, buildings, machinery, and other appurtenances attached thereto. After the company's incorporation a sale deed was executed on 4th March, 1938, by which, in consideration of a sum of one lac of rupees, the company obtained immovable properties consisting of land, buildings, fixed machinery and other immovable properties of the mill and press and other legal incidents together with the good will of the business and the right to use the name of Krishna Mill and Press and benefit of all contracts and all legal incidents of the Krishan Mills. The company has carried on that business ever since it was acquired on 4th March, 1938.
(2.) ON 10th June, 1939, a notice was served upon the company under S. 34(1) of the IT Act in respect of an assessment which should have been made in the year 1938-39. On 20th Aug., 1940, the assessment was completed and the company was assessed in a sum of Rs. 14,723. The assessment was made upon the profits of the concern from 29th Sept., 1936, to 8th Oct., 1937. It has been held by the Tribunal that the company is the successor to the firm of Jaidayal Sagarmal and alone is liable to be and had been assessed in respect of the profits during the year, the subject of assessment. Two questions which now come for consideration are : (i) Whether on the facts found by the Tribunal a case of succession as contemplated by S. 26(2) has been made out ? (2) Whether the assessment for the year 1938-39 made in 1939-40 was correctly made on the basis of S. 26(2) as it stood before it was amended by the IT Act of 1939 ?
(3.) SO far as succession is concerned the only point in the argument on behalf of the company that it did not succeed and is not the successor of the business of the old firm is by reference to one entry in a profit and loss account which was supplied by the company and is attached to the application under S. 66(1) of the Act. In this profit and loss account the total receipts of the firm amount to Rs. 41,446-9-3, the expenses amount to Rs. 8,860-15-9 and the difference between the expenses and the receipts is the sum of Rs. 32,580-14-9. Among the receipts under the heading "Hemp a/c," is a sum of Rs. 5,353-8-3. In the assessment a deduction has been made, under the head of "Profit from dealing with hemp (not taken by this company)," of Rs. 5,354. From this it is argued that the company did not succeed to the first as it did not take over its hemp business. What the reasons were for this sum being deducted does not appear.;