Civil Appeal No 95 of 1964
Appeal from the judgment and order dated April 14 1961 of the Punjab High Court in Income tax Reference No 23 of 1958
section T Desai R Ganapathy Iyer Gopal Singh BRGK Achar and R N Sachthey for the appellant
A V Viswanatha Sastri T A Ramachandran O C Mathur for the respondent
The Judgment of the Court was delivered by Shah J
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 Ms 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 Kuthiala hereinafter called 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 1943
In assessment proceedings for 1943 44 the assessee contended that the firm Messrs 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 section 253 or in the alternative under section 254 of the Indian Income tax Act 1922
The Income tax Officer completed the assessment without giving to the assessee the benefit of sub sections
3 or 4 of section 25 of the Indian Income tax Act 1922
The Appel 647 late Assistant Commissioner confirmed the order holding that succession to the family firm Messrs Hakam Mal Tani Mal took place on April 1 1939 and that firm alone was entitled to relief under section 254 and to the second succession which took place on April 1 1943 after Act 7 of 1939 was brought into force relief under section 254 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 section 662 of the Indian Income tax Act 1922 the Tribunal drew up a statement of the case and submitted the following ques tion 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 Section 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 section 25 4 of the Act
With certificate granted by the High Court this appeal has been preferred
Sub section 4 was inserted in section 25 of the Indian Incometax 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 may further claim that the income profits and gains of the previous year shall be deemed to have been the in come 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 648 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  
There is no dispute that the Hindu undivided family of Hakam Mal Tani Mal was taxed under the Indian Income tax Act 1918 in respect of the timber business and Messrs Hakam Mal Tani Mal succeeded to that business in 1934
Accounts of Messrs Hakam Mal Tani Mal were settled on March 31 1939 and the business in timber which was carried on by that firm was taken over by the assessee
The departmental authorities held that the assessee was at the commencement of the Indian Incometax Amendment Act 7 of 1939 not carrying on business and that it succeeded to the business on April 1 1943
The High Court disagreed with that view and opined that the assessee was at the commencement of Act 7 of 1939 carrying on business and correctness of that opinion is challenged in this appeal
The Indian Income tax Amendment Act 7 of 1939 was brought into force on April 1 1939
Section 5 3 of the General Clauses Act 10 of 1897 provides that unless the contrary is expressed a Central Act or Regulation shall be construed as coming into operation immediately 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 1939
The assessee contends and the contention has found favour with the High Court that the assessee was carrying on business at the commencement of the Indian Income tax Amendment Act 7 of 1939
In support of the plea of the assessee reliance was placed only upon the instrument of partnership which was executed on June 29 1939
The question in dispute must therefore be determined on a true interpretation of the terms of the instrument of partnership
Insofar as it is material the instrument recites  We R B Jodha Mal Kuthiala son of Lala Gopi Mal Sahib Sud of the one part and Gajjan Mal Kuthiala son of Lala Hakam Mal Sahib Sud Kuthiala of the other part residents of Haroli District Hoshiarpur
and presently of Simla
649 Whereas we the deponents were partners and shareholders in the firm of Lala Hakam Mal Tani Mal Simla and all the partners of firm Lala Hakam Mal Tani Mal understood and settled their accounts upto the 31st of March 1939 on the 31st of March 1939 and all the partners have become separate from the 1st of April 1939 and the business at Abdullapur in the name of firm Hakam Mal Tani Mal and R B Jodha Mal Kuthiala has fallen to our share to run which we have by means of an oral agreement constituted a separate partnership styled R B Jodha Mal Kuthiala Abdullapur from the 1st of April 1939
Now the said oral agreement is being reduced to writing and we agree that  The instrument of partnership in the first instance recites that the accounts of Messrs Hakam Mal Tani Mal were settled on March 31 1939 and upto March 31 1939
It is then recited that all the partners had become separate from April 1 1939
This is an ambiguous recital  it may mean that the dissolution had taken place on April 1 1939 ie the business had continued for the whole or a part of the day on April 1 1939 or it may mean that from the end of March 31 1939 there had been separation
When a deed recites that a transaction is effective from a particular date it has to be determined in the context in which that expression occurs whether the date mentioned has to be excluded or to be included
The recitals in the instrument that the accounts were settled upto March 31 1939 and that the partners had become separate would imply that the firm of Messrs Hakam Mal Tani Mal did not do business after March 31 1939
no date of the oral agreement constituting a separate partnership of the assessee is not set out in the instrument and there is no other evidence in that behalf
But the assessee was constituted to carry on the timber business allotted to it at the time of dissolution from April 1 1939
The timber business was an old and a running business and an intention to maintain continuity of the business and its transactions may reasonably be attributed to the assessee
It must therefore be held that the assessee commenced doing business immediately after the dissolution of the firm Messrs Hakam Mal Tani Mal become effective
In the absence of other evidence it may be held that the business of Messrs Hakam Mal Tani Mal continued till the midnight of March 31 1939 and immediately thereafter the business of the assessee commenced
650 The partnership therefore came into being at the precise point of time at which the Indian Income tax Amendment 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 the Indian Income tax Amendment Act 7 of 1939
The High Court was therefore in our judgment right in holding that the assessee was entitled on the dissolution of that firm in March 1943 to the benefit of section 254 of the Indian Income tax Act
The appeal fails and is dismissed with costs
Appeal dismissed


Summary:
A Hindu undivided family was assessed to tax under the Indian Income tax Art 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
Ibis firm was dissolved on March 31 1939 and its accounts were settled on and up to that date
The timber business of the dissolved firm was taken over by the assessee firm
An instrument of partnerhip for 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 1943 44 the assessee claimed benefit under section 253 or in the alternative section 254 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 section 254
The Commissioner of Income tax with certificate appealed to the Supreme Court
The material question for determination was whether the assessee was carrying on business at the commencement of Act 7 of 1939 so as to be entitled to the benefit under section 254
HELD The Indian Income tax Amendment Act 7 of 1939 was brought into force on April 1 1939
Section 53 of the General Clauses Act 10 of 1897 provides that unless the contrary is expressed 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 1939
648 D E 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 separate would imply that the firm formed in 1934 did not do business after March 31 1939 the assessee was constituted to carry on the timber business allotted to it at the time of dissolution from April 1 1939
The timber business was an old and running business and an intention to maintain continuity of the business and its transactions may reasonably be attributed to the assessee
It must therefore be held that the assessee commenced doing business immediately after the dissolution of the firm of 1934 become effective
The business of that firm continued up to the midnight of March 31 1939 and immediately thereafter the business of the assessee commenced
649 E H 650 A 646 The new partnership therefore came into being at the precise period 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 the Act
The High Court was therefore right in holding that the assessee was entitled on the dissolution of the firm in March 1943 to the benefit of section 254 of the Indian Income tax Act 1922