1960 PLP 646 (PTD)

There is one more fact of this question. The heads of income chargeable to income‑tax on which so much stress is laid on behalf of the Revenue, have varied at different times since 1918. I do not deem it necessary to examine these changes in any detail and will refer only to one head of income. Prior to the amend ment of section 12 by the Finance Act of 1955 income from dividend from shares which were the stock‑in‑trade of a business was all along held to be profits and gains of the business under section

10. By amendment made in 1955 dividends now fall under section 12 (1‑A) as one of the "other sources" dealt with by section

12. Mr. Palkhivala has relied on this amendment in support of his arguments. In my opinion this is an additional considera tion which cannot be overlooked. There is another aspect of the matter. It is sometimes said that the exemption in section 25 (3) is conferred on a business and not the person who carried on that business. Mr Palkhivala also in the course of his arguments adopted this line for the purpose of show ing that whatever the nature of the income of a business and under whichever head it is taxed it attracts the exemption. True, section 25 (3) does not in terms state that the exemption is granted to the person and speaks of non‑liability to pay tax in respect of the income, profits and gains of a discontinued business. But the way I read the subsection is that the exemption from double taxa tion is conferred on the person it may be a firm‑who was carry ing on any business which is discontinued and was charged to tax under the Act of 1918. Primarily charge of income‑tax is directed to the person, natural or artificial, who earns income, profits and gains from whatever source rather than to the ownership or enjoy ment or activity which is the source of it. This seems to me to follow from sections 3 and

4. Take the case of a firm. A firm by virtue of these charging sections is taxed in respect of the total income of its business to adhere to the words of section 4 "including all income, profits and gains from whatever source derived." Speaking generally the tax is on the entity‑the firm‑in respect of its income. The assessment is made on the entity who is the assessee, and again speaking generally, collected from the assessee. This principle is the substratum of section

3. Another basic principle on which the section rests is that the levy is to be on the total income of that assessable entity. Where that assessable entity is an individual or a firm carrying on business the charge is on the aggregate income, profits and gains derived from that business. And if exemption is given in respect of the income, profits and gains of that business on the principle of avoidance of double taxation, it would naturally and normally be a concession in respect of the aggregate income, profits and gains derived from that business by the assessable entity. It is these basic principles which lead me to the conclusion that the exemption is to the person, natural or artificial, whose income from that business is the subject- matter of section 25 (3). Section 25 (4) in terms speaks of the person. Considerable support is to be derived for this proposition from the observations of the Privy Council and of Kania, C. J., which I have already quoted before. The liability of that person, natural or artificial, to pay the tax is founded on sections 3 and 4 of the Act. Therefore, when you consider a provision which enacts that the liability is exempt in case of discontinuance of the business carried on by that person in respect of the terminal period, you have to go to those sections to see what that liability was which attracts the exemption. The fundamental position was brought out in bold relief in the House of Lords case of Whitney v. Commissioners of Inland Revenue ((1926) A C 37, 52) where Lord' Dunedin, speaking with accredited accuracy as to these tax cases, stated: "Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." This passage has become locus classicus and was cited with approval by the Federal Court in Chatturam v. Commissioner of Income‑tax ((1947) 15 I T R 302, 308) and very recently by the Supreme Court in Chattu ram Horliram v. Commissioner of Income‑tax ((1955) 27 I T R 709, 716). The exemption in section 25 (3) has to do with the incidence of liability. The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified. The liability is definitely and finally fixed by the charging sections. The stage of assessment is not yet. Therefore, when you say that the liabi lity to pay tax is exempt, it is not in the context of that machinery but in the context of the first stage of liability which, as Lord Dunedin pointed out, ex hypothesi has already been fixed. It is this concept of imposition of the tax and exemption from such imposition which to my mind leads to the solution of the case. No tax is to be charged in a case falling under section 25 (3) and Chapter III which deals with heads of income does not enter into the scheme or meaning of section 25 (3). Sections 7 to 17 in that chapter are computing sections. They deal with the mode or manner of computation or ascertainment of the quantum of tax under various heads and come into operation only when tax has to be charged as enjoined by sections 3 and

4. Therefore, in a section which lays down that no tax is to be charged in respect of the income, profits and gains of a discontinued business in respect of the terminal period, it is impermissible to implant either the concept or the language and meaning of any of the sections 6 to

17. All these considerations lead me to the conclusion that the "business" contemplated in section 25 (3) is to be understood in the proper legal sense attributable to that expression without recourse to the artificial conception urged on behalf of the Revenue. Aid can, of course, be derived in considering a section from other sections of the statute so long as by doing so you do not alter the meaning of what is itself clear and explicit or diminish the efficacy of any express provision therein contained. In case of the section before us I am unable to see any reason for attributing to the word "business" any modified and straitened meaning as pressed on behalf of the Revenue. Words of limitation are not as a rule to be read into a statute unless the subject‑matter or context so requires. We are not dealing with any sweeping general words but an expression of ample legal content. We are asked to acquiesce in a non‑legal construction which limits the operation of the sub section, so as to make the exemption given by it, not commen surate with the income, profits and gains of a business, as understood in the legal sense and as understood in other cognate provisions and provisions having interaction. It is not permissible in case of a provision of the nature under consideration, therefore, to read into it words by implication and make it smaller than what its terms express. Considerations grounded on the scheme of the Act, the scheme and object of section 25 (3), the principle of cogency which requires that relevant provisions of an enactment must as far as possible be read so as to harmonize them and other considerations which I have already discussed, are in my judg ment abiding grounds for construing section 25 (3) as exempting the income, profits and gains of a discontinued business, without excluding from such income, profits and gains interest on securities where the securities are themselves stock‑in‑trade of the business. This is the only way I am able to read section 25 (3) after giving the words of the section their proper legal meaning and after reading the subsection along with other cognate sections and in the context of income‑tax law by which latter expression I under stand that the meaning and import of any provision in this fiscal enactment must be gathered in the light of general principles and the well‑established rules of interpretation, that the true meaning of any passage is that which (being permissible) best harmonizes with the subject and with every other passage of the statute and if you can do so without straining the language of a fiscal statute you must construe it in a manner which enables the smooth working of the system which it purports to regulate. I have so tar omitted from discussion the meaning and import of the words "income, profits and gains" in section 25 (3) without being unmindful of them. Learned counsel for the Revenue in the very opening of his argument stated that they were not germane to the question of construction of this subsection. The submission also was that the expression meant nothing more than profits and gains of a business as understood in case of the head of income mentioned in section 6 (iv) and dealt with in section

10. The whole case for the Revenue had to be based on this narrow foundation of section

10. In my judgment it is ill‑founded. Mr. Joshi has in effect asked us to treat the word "income" used in section 25 (3) as tautologous and superfluous when he said that it meant the same thing as "profits and gains" and was synony mous with the latter expression. I am unable to agree. It is well established that in the context of the charging section the expres sion "income" has a very wide import‑wider than profits and gains. And I see no reason for equating the words "income, profits and gains" used in section 25 (3) with "profits and gains." The word "income" itself is of such broad connotation that with out adding anything to it you can cover the whole ground of chargeability but the words "profits and gains" are not of such elastic ambit. How wide is the import of the expression "income" used in the charging sections 3 and 4, can be gathered from numerous decisions. I shall quote one passage from the judgment of my Lord the Chief Justice (Chagla, J., as he then was) in In re Kamdar ((1946) 14 I T R 10, 54) where reference was made to the leading cases on the point: "In Commissioner of Income‑tax v. Shaw Wallace do Co. (1932) 59 I A 206 Sir George Lowndes delivering the judgment of the Privy Council defined `income' as a periodical monetary return `coming in' with some sort of regularity, or expected regularity, from definite sources. He likened `income' pictorially to the fruit of a tree, or the crop of a field. He further points out that the expansion of `income' into income, profits and gains is more a matter of words than of substance. In Gopal Saran v. Commissioner of Income‑tax (1935) 3 I T R 237, the Privy Council went as far as saying that anything which can properly be described as income is taxable under the Act unless expressly exempted. Lord Wright in the judgment of the Privy Council in Kamakshya Narain Singh v. Commissioner of Income tax (1943) 11 I T R 513, appreciates the difficulty of defining `income' and concedes that it is perhaps impossible to define it in any precise general formula, but he says that it is a word of the broadest connotation. He rather disapproves of Sir George Lowndes' pictorial language and sounds a note of warning against using picturesque similes to limit the true character of income in general." In Gopal Saran v. Commissioner of Income‑tax ((1935) 3 I T R 237, 242), their Lord ships of the Privy Council held that in section 12 the words "income, profits and gains" are used in a disjunctive sense and the word "income" is not limited by the words "profits" and "gains." It was there contended that these words as used in section 12 (1) must be construed as including only such income as constitutes or provides a profit or gain to the recipient, i.e., that the word "income" was in some way limited by its association with the words "profits" and "gains." The contention was negatived and it was observed: "The word `income' is not limited by the words `profits' and `gains'. Anything which can properly be described as income, is taxable under the Act unless expressly exempted." I have already observed that the concept of imposition of the tax and exemption from such imposition emerges from sections 3, 4 and 25 (3) read together. In the observations cited above their Lordships of the Privy Council, it humbly appears to me, do broadly approve of this concept. In my judgment, the use of the words "income, profits and gains" in the context of a discontinued business is purposeful and connotes their amplitude and the words lend support to the conclusion I have already arrived at that from this income, profits and gains you cannot exclude interest on securities in case of a person who claims exemption on the ground that the interest was on securities which themselves were the stock -in‑trade of his business. But the Revenue while it claims the statutory right to impose tax on a person in respect of any income of his business from whatever source derived demurs to his claim for exemption from double taxation under a provision in which also are to be found the same words of wide import and asks us to put a narrow construction on them. The whole contention on behalf of the Revenue here also has depended upon an insistence that inasmuch as the words "profits and gains of a business" have a restricted meaning in the scheme of sections 6 to 12 they must control the ambit of section. 25 and the words "income, profits and gains" there used must also be read to mean no more than the profits and gains of a business in the same restricted sense. How fragile this argument is, can be seen when one reads section 25 (1) which says: "Where any business, profession or vocation to which sub section (3) is not applicable, is discontinued in any year, an assessment may be made in that year on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance in addition to' the assessment, if any, made on the basis of the income, profits or gains of the previous year." It is not disputable that the income, profits and gains of a discontinued business must mean the same thing in subsection (1) and subsection (3). As I have already pointed out an accelerated assessment may at the option of the Income‑tax Officer be made in respect of the income, profits and gains of a discontinued business under subsection (1) unless subsection (3) is applicable. Is this assessment to be confined only to profits and gains of the business in the restricted sense of section 10 or is the assessment to be on the aggregate income, profits and gains of the business, that is, inclusive of income of the business from every source? The answer must be that there can be one assessment and it can only be in respect of the entire income, profits and gains of the business chargeable under sections 3 and

4. In my opinion sections 6 and 10, so much relied on by Mr. Joshi, are no indicia to determine the meaning and import of the word "income"; they only lay down a method of its computation. It is little use dwell ing on them. As my Lord the Chief Justice (Chagla, J., as he then was) observed in Kamdar's case sections 6 to 12 do not in any way control or limit the conditions of chargeability laid down in section 4 and merely provide a machinery for the purpose of computation for every species of income. In my judgment, for identical reasons, they cannot be read as in any way controlling or limiting the conditions of exemption from that chargeability unless there is a compelling reason for doing so. In construing these words "income, profits and gains" in their context of a discontinued business, we must give them their ordinary legal meaning. The rule of cogency requires that as far as possible these words in subsection (3) of section 25 should have the same meaning attributable to them in subsection (1) and sub section (4) and in other cognate sections. Section 26 and section 44 to which I have already made reference are instances in point. I shave also pointed out from the decisions of the Privy Council and the Supreme Court that sections 26 and 25 form part of a single scheme and how section 25 (4) was said to be consequential on section 26 (2). It would only be a compelling context which could induce the Court to impose upon these words "income, profits and gains" of a discontinued business a meaning which carves out a good deal from their ordinary legal sense. The context supports the construction urged by the assessee and requires me to read the words in their legal sense and not in any restricted manner. For all these reasons, I am of the opinion that on a true construction of section 25 (3) interest on securities which form part of the stock‑in‑trade of a business is part of the income, profits and gains of that business and entitled to exemption under that subsection. So far, I have dealt with the matter on principle and in the light of judicial pronouncements instructive of the principle but without reference to any authority on the construction of section 25 (3). Is there any authority which compels me to refrain from giving effect to the conclusions at which I have come ? I can find none in those that have been cited to us. The one more relied upon by Mr. Joshi was Ambalal Himatlal v. Commis sioner of Income‑tax ((1951) 20 I T R 280). The head-note to that report is not accurate and does not bring out the ratio decidendi of that case. Mr. Joshi has relied on certain observations from the judgment of my Lord the Chief Justice and my learned brother Tendolkar, J., in that case. Now the way I approach any income‑tax matter is that it should be my endeavour to appreciate and respectfully follow any direct observation made by this Court in another decision when I see that it was the reason which induced the Court to reach a conclusion. It is true that there is one observation made in that judgment which at first blush may seem to lend some support to the contention urged on behalf of the Revenue. But when you read that observation in its context you find that it was made only in refutation of an argument urged on behalf of the assessee who in that case had a reference made to the High Court. When you examine the facts of the case and the submissions there made it becomes clear that the observation was made in the limited context of those facts and submissions. Before I refer to the same, it is necessary to state briefly the facts of that case. The assessee, a Hindu undivided family, was in 1943, when it was disrupted, carrying on three distinct and separate businesses: (i) money‑lending business; (ii) running a ginning factory; (iii) a share business. It was found, and this is important, that only the money lending business had paid income‑tax under the Act of 1918. On these facts the assessee claimed the exemption granted by section 25 (4) not only in respect of the income, profits and gains of the money‑lending business but curiously enough in respect of the total income, profits and gains of all the three businesses. There was only the money‑lend ing business subsisting in 1921‑22 and in the statement of case the Tribunal stated that this fact was not disputed. The Tribunal held that the assessee was entitled to relief only in respect of the money‑lending business which was charged to Income‑tax under the Act of 1918. At the hearing of the reference the ingenious argu ment urged on behalf of the assessee by Sir Jamshedji Kanga was, that when you look at section 25 (4) it is clear that the Legislature intended to give relief not merely in respect of the particular business which was assessed to tax under the Act of 1918, but the relief contemplated was in respect of the total income of the assessee whose business was succeeded to. The argument was based on the language used in subsection (4) to the effect that "no tax shall be payable by the first mentioned person in respect of the income, profits and gains for the period between the end of the previous year and the date of such succession". And it was in support of this argument, that it was pointed out that when you turn to section 10 which deals with tax on business, profession or vocation the language used is "profits and gains of any business, profession or vocation". It is essential to note that the attempt was to show that section 10 speaks of "any business" and therefore the exemption given by section 25 (4) should not be confined to the particular business which was charged to tax under the Act of 1918 but "any business" meaning all the three businesses of the assessee which at the time of disruption of the Hindu undivided family were being charged to income‑tax. There fore, there was really an endeavour to introduce the concept and language of section 10 in the ambit of section 25 (4). The contention was negatived as ingenious and the Court declined to accept the interpretation of section 25 (4) urged by the assessee which would have led to absurd results. In the course of his judgment the learned Chief Justice in examining the novel contention of the assessee, that he was exempted from payment of tax in respect of all the three distinct and separate businesses even though two of them did not even exist prior to 1922, observed at page 285 of the report: "If that was the policy of the Legislature it is difficult to understand why relief should be given to a person whose business is succeeded to in respect of not only that business but also in respect of all sources of income." Then in proceeding to examine the argument which sought to introduce the concept underlying the words "any business" in section 10 and in section 25 (4) the learned Chief Justice observed: "If we were satisfied that the Legislature intended to use the expression `income, profits and gains' not only for the purpose of indicating the profits and gains of the business as con templated by section 10 but also for the purpose of indicating the total income of the assessee then no doubt we would have to come to that conclusion, however reluctantly ; but fortunately there is a clear indication in this subsection itself. What the Legislature intended by using the expression `income, profits and gains' was the profits and gains of the business or profession contemplated by section 10 and not the total income of the assessee . . . . . ." It is the latter part of these observations that are relied upon by Mr. Joshi. The ratio of the judgment is to be gathered from the following observations at page 286 of the report: "Further when you look at subsection (4) as a whole, apart from the use of the expression `income, profits and gains' it is clear that the conditions required for obtaining of relief under this subsection are firstly, carrying on any business, profession or vocation ; secondly, tax being charged on this business, profession or vocation under the Act of 1918 ; and, lastly, succession to any such business or vocation in such capacity by another person. Therefore, such other person must not only succeed, he must also succeed in such capacity, which means, he must carry on the same business, profession or vocation which had been carried on by the assessee to whom relief is to be given. If these conditions are satisfied then no tax is payable by the first mentioned person who is the person to whom relief is intended to be given in respect of the income, profits and gains of the period between the end of the previous year and the date of such succession." It emerges, therefore, from the observations quoted im mediately above that the ultima ratio of the decision is that the exemption is confined to the income of the particular business and did not embrace the total income of the assessee. It is confined to the income of the particular business which was charged to tax under the Act of 1918 and not to any other distinct and separate business which did not fulfil the conditions laid down in section 25 (4) and which conditions must be satisfied before the exemption could be attracted. I have already said the observation about section 10 was made only in the context of the facts of the case and to negative the submission made on behalf of the assessee. Needless to state that I would have dutifully and respectfully founded myself on the above decision if the ratio of it was as suggested on behalf of the Revenue. But that ratio clearly is different as I have pointed out above. If the observations are read in the context of the submission and the line of argument followed on behalf of the assessee in that case, and they must be so read, if I may respectfully make the observation, there is nothing in that decision from which the Revenue can derive any support, The case is clearly distinguishable. The other decision relied upon by Mr. Joshi was Gopi Mohan & Sons v. Commissioner of Income‑tax ((1947) 15 I T R 220). The facts in the reference before the Allahabad High Court were that a certain Hindu undivided family which was assessed in respect of its income from property became divided in the previous year relevant to the assessment year 1941‑

42. It was held that there was a partition in the family as from 31st January, 1941. An application was made claiming relief under section 25 (3) and it was rejected. It was not in dispute that the Hindu undivided family was assessed under the Act of 1918 but the assessment was made only in respect of income of the property and not any business. The Tribunal also rejected the second appeal. That was on the ground (1) that section 25 (3) applied only to a case where tax was charged under the Indian Income‑tax Act, 1918, on business, profession or vocation and did not apply to a case where tax was charged on income from property, and (2) that from the very nature of the case, it could not be said that there was any discontinuance of a business charged to tax under the Act of 1918. The High Court on a reference approved of the decision of the Tribunal as perfectly correct. It was, however, urged at the hearing of the reference that it was an anomalous position that while relief was granted in respect of a business none was granted in case of income from property. The argument solely based on an anomaly was rejected by the Court as ill‑founded. Reliance was, however, placed on the following observations in the judgment at page 223 of the report: "The method of computation of income from property has been laid down in section 9, while that for the computation of income from business, profession or vocation has been described in section

10. From this it is clear that the expression `business, profession or vocation' used in section 25 (3) relates to that head of income, which has been dealt with in section 10, and is quite distinct from the head of `income from property' which has been mentioned in section 9." It may be pointed out that there was no question of any income profits and gains of a business in that case ; nor any question of any property owned on account of any such business. It is also clear that the learned Judges regarded sections 9 and 10 as dealing with the method of computation. True, the learned Judges have observed that "the expression `business, profession or vocation' used in section 25 (3) relates to that head of income, which had been dealt with in section 10" and is quite distinct from the head of income mentioned in section

9. Now I agree that exemption under section 25 (3) is in respect of income from business but with great respect I am unable to agree that section 25 (3) relates to that head of income which has been dealt with in section

10. On the facts which I have summarised the decision could not have been different. It will be seen that the position there was quite different and the decision is clearly distinguishable. For the reasons I have given I would answer the question in the affirmative. TENDOLKAR, J.‑As my learned brother and I are not agreed as to the correct answer to the issue which we have re‑framed, the case would be heard by one or more of the other Judges of the High Court as the Chief Justice may direct under the proviso to section 66‑A of the Income‑tax Act. Costs of the reference before us will be costs in the reference to be so tried. [The reference came before K. T. Desai, J., who delivered judgment on December 17, 18, 1958]. K. T. DESAI, J.‑Messrs Chugandas & Co., (Securities), Bombay, a registered firm, hereinafter referred to as "the assessee", was a dealer in securities. Securities constituted the stock‑in‑trade of its business. It received a sum of Rs. 4,13,992 as and by way of interest on securities during the accounting year 1946, the assessment year being 1947‑

48. The assessee firm was dissolved on 30th June, 1947. It received a sum of Rs. 1,01,229 during the accounting period 1st January, 1947, to 30th June, 1947, the assessment year being 1948‑49, as interest on securities. The business carried on by the assessee was an old business. It had paid tax in connection with that business under the provisions of the Indian Income‑tax Act, 1918. That business having been discontinued, the assessee became entitled to the benefit of the provisions contained in section 25 (3) of the Indian Income‑tax Act, 1922. A question has arisen whether the benefit conferred by section 25 (3) extended to interest on securities received by the assessee as aforesaid. At the instance of the Commissioner of Income‑tax, Bombay City I, the following question was referred to this Court under section 66 (1) of the Indian Income‑tax Act: "Whether on the facts and circumstances of the case interest received on securities held by the assessee formed part of the assessee's business income for the purpose of claiming relief under section 25 (3) of the Indian Income‑tax Act ? " After the reference was made, the Supreme Court gave its judgment in the case of United Commercial Bank Limited v. Com missioner of Income‑tax ((1957) 32 I T R 688). In that case the Supreme Court held that where securities are held by a banker as part of his trading assets in the course of his business, income from interest on securities was required to be shown under the head "Interest on securities" falling under section 8 of the Income‑tax Act, 1922, and not under the head "Profits and gains of business, profession or vocation" falling under section 10 thereof. Having regard to the decision of the Supreme Court, when the matter came up for hearing before Mr. Justice Tendolkar and Mr. Justice S. T. Desai, the question was re‑framed in order to bring out the real point in controversy between the parties. The re‑framed question is as follows: "Whether the assessee is entitled to the benefit of section 25 (3) in respect of the interest on securities ?" There was a difference of opinion between Mr. Justice Tendolkar and Mr. Justice S. T. Desai, as regards the answer to be given to the aforesaid question. Mr. Justice Tendolkar was of the opinion that the assessee was not entitled to the benefit of section 25 (3) in respect of the interest on securities white Mr. Justice S. T. Desai was of the opinion that the assessee was entitled to such benefit. The matter has now come up for hearing on that question before me under the provisions contained in section 66‑A of the Indian Income‑tax Act, 1922. The provisions of section 25 (3), which have given rise to the controversy, run as follows: "Where any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income‑tax Act, 1918 (VII of 1918), is discontinued, then, unless there has been a succession by virtue of which the provisions of subsection (4) have been rendered applicable no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinuance, and the assessee may 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 on such assessment, a refund shall be given of the difference." The applicant contends that when the Legislature used the words "any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income‑tax Act, 1918" it referred to tax only on income under the head "income derived from business" falling under section 9 of the Indian Income‑tax Act, 1918, and on income under the head " Professional earnings " falling under section 10 of the said Act. It is further contended that when the Legislature in the year 1922 used the words "no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinuance" it intended to refer only to income, profits and gains liable to be shown under the head "Business" under section 10 of the Indian Income‑tax Act, 1922, as originally enacted and under the head " Professional earnings" under the repealed section 11 of the said Act and that these words now refer to the income, profits and gains liable to be shown under the head "Profits and gains of business, profession or vocation" under the present section 10 of the said Act. It is further urged that when the Legislature used the words "and the assessee may 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", the Legislature was only referring to what was liable to be shown under the heads "Business" and "Professional earnings" referred to in sections 10 and 11 of the said Act as first enacted and that those words now refer to what is liable to be shown under the head "Profits and gains of business, profession and or vocation" under the present section 10 of the said Act. It is further contended that when the Legislature used the words "the income, profits and gains" in the sentence "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 on the difference", the Legislature was referring only to the income, profits and gains liable to be shown under sections 10 and 11 of the said Act as first enacted in the year 1922 and that those words now refer to what is liable to be shown under the present section

10. Having regard to the decision of the Supreme Court in the case of United Commercial Bank Limited v. Commissioner of Income‑tax ((1957) 32 I T R 688), the present position in law is that where an assessee derives income, profits and gains from a business carried on by him, such income, profits and gains may have to be shown under the various heads. If securities constitute the stock‑in‑trade of his business, interest received in connection with those securities would have to be shown separately under the head "Interest on securities" covered by section 8 of the Act of 1922. If the business consisted of purchase and sale of houses, the income derived from such houses would have to be shown separately under the head " Income from property " under section 9 of tile Act of 1922. If shares of joint stock companies constitute the stock‑in‑trade of such business, the dividend income derived therefrom would have to be shown separately under the head "Income from other sources" under section 12 as it now stands after the amendment made in the year 1955 and it is only the residue which may remain thereafter which would have to be shown under the head "Profits and gains of business, profession or vocation" covered by section

10. Even under the Indian Income‑tax Act of 1918, if an assessee derived income, profits and gains from a business carried on by him, he was under an obligation to show the interest received by him from securities which constituted the stock‑in‑trade of his business under the head " Interest on securities " covered by section 7 of the Act of 1918. If purchase and sale of house property constituted the business of such assessee, then the income derived from house property was liable to be shown separately under the head "Income derived from house property" under section 8 of the Act of 1918. Only the balance of income, profits and gains of such business remaining thereafter was liable to be shown under the head "income derived from business" under section 9 of the Act of 1918. It is contended on behalf of the assessee that when the Legislature used the words "where any business . . . . . . on which tax was at any time charged under the provisions of the Indian Income‑tax Act, 1918," in section 25 (3) it referred to the tax which might at any time have been charged under the Act of 1918 under any of the three heads referred to by me above in respect of the income, profits and gains of the business carried on by the assessee. It is further contended on behalf of the assessee that where such business is discontinued, no tax is payable in respect of the income, profits and gains of such business for the period between the end of the previous year and the date of such discontinuance which may have to be shown under each of the four heads referred to by me above under the Indian Income‑tax Act, 1922. It is further contended by the assessee that the words "and the assessee may 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" also refer to the income, profits and gains of such business which are required to be shown under each of the aforesaid four heads under the Act of 1922. It is also contended that when the Legislature used the words " 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 on the difference", the Legislature was referring to the income, profits and gains of such business liable to be shown under each one of the aforesaid four heads under the Act of 1922. In order to adjudge which of these rival contentions is correct, it is necessary to look fairly at the language used by the Legisla ture in section 25 (3) itself. That section speaks of "any business . . . . . on which tax was at any time charged under the provisions of the Indian Income‑tax Act, 1918." It is common ground that a business was not a unit of assessment under the Indian Income‑tax Act of 1918. What the Legislature intended to convey was any business, on the income, profits and gains whereof tax was at any time charged under the Indian Income‑tax Act of 1918. Section 2 (4) of the Indian Income‑tax Act of 1922, lays down that unless there is anything repugnant in the subject or context, the expression " business " includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The expression "business" in section 25 (3) can only refer to the activity which is styled business. What has to be discontinued is that activity before the section can apply. If what is to be discontinued is that activity business, the tax which is referred to in connection with that activity business must of necessity refer to the tax payable in connection with the income, profits and gains derived from that activity business irrespective of the head or heads under which such income, profits and gains are required to be shown under the provisions contained in the Indian Income‑tax Act, 1918. The expression "business . . . . . on which tax was at any time charged" on a plain reading of the section must refer to the tax charged under any of the heads under which the income, profits and gains made as a result of such activity may have been entered. If such income, profits and gains included interest on securities which constituted the stock‑in‑trade of that business, the tax paid under the head " Interest on securities", would be covered. There is no warrant for confining the tax to only one head. When the Legislature thereafter uses the words "no tax shall be payable in respect of the income, profits and gains", the Legislature is referring to the tax otherwise payable in respect of the income, profits and gains derived from the activity business referred to earlier. The income, profits and gains of business here referred to do not refer exclusively to income, profits and gains liable to be shown under the head referred to in section 10 of the Act of 1922. The intention of the Legislature is to completely exempt the income, profits and gains resulting from the activity styled "business" for the period referred to in the section. When the Legislature uses the words "and the assessee may 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", the Legislature is referring to the totality of income, profits and gains in connection with the activity styled "business" under that subsection and not merely to the income, profits and gains liable to be shown under section

10. When the Legislature uses the further words "where any such claim is made, an assessment shall be made on the basis of the income, profits and gains of the said period", it refers to all the income, profits and gains made in connection with the activity styled business in that section. When the Legislature uses the further words "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", the Legislature there again is referring to all the income, profits and gains of the activity termed business in that section. It seems to be a far‑fetched construction of that section to say that what the Legislature intended was not the totality of the income, profits and gains of the activity termed business but was intending what was liable only to be entered under the provisions contained in section

10. The term "business" for the purpose of discontinuance cannot have one meaning and the same term "business" for the purpose of tax cannot have another meaning. Subsection (3) of section 25 was enacted in order to mitigate the effect of double taxation levied in respect of the income, profits and gains of one accounting year having regard to the changes made in the income‑tax law by the Act of 1922. Sec tion 14(2) of the Act of 1918 provided as follows: "Subject to the conditions hereinbefore set out, there shall be levied in respect of the year beginning with the first day of April, 1918, and in respect of each subsequent year, by col lection in that year and subsequent adjustment as hereinafter provided income‑tax upon every assessee in respect of his taxable income in that year at the rate specified in Schedule I" Under the aforesaid provisions the income, profits and gains for the accounting year 1921‑22 were liable to be charged to tax in the assessment year 1921‑22 under the Act of 1918. There was a material alteration in the aforesaid scheme of taxation made by the consolidating and amending Indian Income tax Act (XI of 1922). Under the Act of 1922 the tax had to be paid in the current assessment year in respect of income, profits and gains of the previous year, with the result that during the assessment year 1922‑23 tax was liable to be paid once again under the Income‑tax Act, 1922, in respect of the income, profits and gains for the accounting year 1921‑

22. The question that I have to consider relates to the extent of the relief granted by the Legislature. There appears to me to be no warrant for giving a very truncated and artificial meaning to the expression, "income profits and gains" used in that section in connection with "business". When the Legislature says that no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinuance, the Legislature intended to exempt from tax all income, profits and gains derived from the activity "business". When giving the exemption the Legislature, in my view, did not contemplate or intend that the assessee would nevertheless have to pay tax in connection with that part of the income, profits and gains made in connection with the activity "business" which may consist of income from securities in a case where securities constituted the stock‑in‑trade of that business. It could not possibly be the intention of the Legis lature in giving the exemption that tax was intended to be charged by the Legislature under three out of the four different heads under which the income, profits and gains derived from business is liable to be shown under the provisions of the Indian Income‑tax Act, 1922. When the Legislature enacted that "the assessee may 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", the Legislature did not intend that the income, profits and gains of that business for the previous year should remain unaltered to the extent that the same are shown under the head "Interest on securities", "Income from properties" and "Income from other sources" and that only the residue thereof shown under the head referred to in section 10 alone should be substituted. When the Legislature provided for an assessment in connection with such business to be made on the basis of the income, profits and gains of the period referred to in that sub‑section, the Legislature did not contemplate the assessment to be made only under the head referred to in section

10. What is provided is that the assessment shall be made "on the basis of the income, profits and gains of the said period". There is no warrant for adding thereto the words "liable to be shown only under section 10". Section 25(3) being part of section 25, it would not be out of place to consider the sense in which the Legislature has used similar words in other parts of the same section. As the marginal note to that section shows, it deals with assessment in case of discontinued business. Section 25 (1) of the Act of 1922 runs as follows: "25. (1) Where any business, profession or vocation to which subsection (3) is not applicable, is discontinued in any year, an assessment may be made in that year on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance in addition to the assessment, if any, made on the basis of the in come, profits or gains of the previous year." When the Indian Income‑tax Act, 1922, was first passed in 1922 the words were "Where any business, profession or vocation commenced after the 31st day of March, 1922, is discon tinued etc." By Act XI of 1924 for the words "commenced after the 31st clay of March 1922," the words "on which income‑tax was not at any time charged under the provisions of the Indian Income‑tax Act, 1918" were substituted. By Act XI of 1944 these newly added words were substituted by words "to which subsection (3) is not applicable " which now appear. This subsection provides for assessment being made in the year of discontinuance itself on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance. Mr. Joshi, the learned counsel for the applicant, at first argued that it seemed as if the expression "assessment" in the subsection referred to the assessment being made in respect of the totality of the income, profits and gains made in connection with the discontinued business during the period referred to therein. He, however, stated that the language of section 25 (3) was different, and that in the con text of the language used in subsection (3) of section 25 the expression "income, profits and gains" bore a different meaning. He stated that such difference arose by reason of the use by the Legislature of the words "assessment may be made" contained in section 25 (1). In answer to that argument it was pointed out that the Legislature in subsection (3) also refers to the making of an assessment when the option given thereby is exercised by the assessee and that a difference in result is not warranted. Mr. Joshi then in the alternative argued that even so far as section 25 (1) is concerned, it refers when dealing with discontinued business to the assessment being made only under the head referred to in section 10 of the Act of 1922. In my view, it would not be proper to give a truncated meaning to the expres sion "assessment" when the Legislature says that assessment may be made on the basis of the income, profits and gains of the period referred to in that section. When assessment has to be made in connection with the income, profits and gains of a busi ness, you have to assess the totality of the income, profits and gains made in connection with that business under whatever head the same may be liable to be entered having regard to the provisions contained in the Income‑tax Act, 1922. Section 25(1) of the Indian Income‑tax Act, 1922, merely autho rises an accelerated assessment in the year of assessment itself. The Supreme Court in the case of Commissioner of Income‑tax v. K. Sri nivasan and K. Gopalan ((1953) 23 I T R 87), has observed at page 97 that all that the section authorises the Income‑tax Officer to do is that it gives him an option to make a premature assessment on the profits earned up to the date of discontinuance in the year of discontinuance itself instead of in the usual financial year. This section does not authorise the splitting up of the assessment in two different years. It was never intended to provide that in the case of a discontinued business, the income, profits and gains in connection with that business have to be assessed to the extent that the income, profits and gains are liable to be shown under the head referred to in section 10 of the Act in the year of discontinuance itself, and that if there is any interest on securities earned in connection with that business in a case where securities constituted the stock‑in‑trade of that business, that interest on securities is to be assessed separately in a subsequent assessment year. In my view, such splitting up was never intended or contemplated by the framers of the Act, and it is not possible to say that when the Legislature was considering the question of assessment under section 25 (1) a part of the income of the discontinued business was to be assessed in one year and another part in another year. In my view, the alternative argument advanced by Mr. Joshi in connection with section 25 (1), viz., that it refers only to an assessment in connection with the head referred to in section 10, is without any merit and without any foundation. I shall now turn to section 25(2). That section provides: "25. (2) Any person discontinuing any such business, profession or vocation shall give to the Income‑tax Officer notice of such discontinuance within fifteen days thereof, and, where any person fails to give the notice required by this subsection, the Income‑tax Officer may direct that a sum shall be recovered from him by way of penalty not exceeding the amount of tax subsequently assessed on him in respect of any income, profits or gains of the business, profession or vocation up to the date of its discontinuance." This subsection deals with the question of the imposition of the penalty, and the words "not exceeding the amount of tax subsequently assessed on him in respect of any income, profits or gains of the business, profession or vocation up to the date of its discontinuance" refer to the assessment made in respect of the totality of the income, profits or gains made in connection with the discontinued business, and not to that part of it which is liable to be entered under the head referred to in section

10. I will now turn to section 25 (4) as it was enacted originally by the Act of 1922. That subsection provided as under: "25. (4) Where an assessment is to be made under subsection (1) or subsection (3), the Income‑tax Officer may serve on the person whose income, profits and gains are to be assessed, or to the case of a firm, on any person who was a member of such firm at the time of its discontinuance, or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection." The assessment referred to in subsection (4) is the assessment which is required to be made under subsection (1) or subsection (3). If assessment which is required to be made under subsection (1) or subsection (3) is the assessment in respect of the totality of the income, profits or gains made in connection with the activity business. The original subsection (4) of section 25 has been re‑numbered as subsection (6) of section 25, and the words "subsection (1) or subsection (3)" therein have been substituted by the words "sub section (1), subsection (3) or subsection (4)". I may also refer to section 26 of the Act of 1922. Section 26 is a section which is correlated to section 25 and it forms an integral part of the scheme of the Act. The Privy Council recognised this fact in the case of Commissioner of Income‑tax v. P. E. Poison ((1945) 13 I T R 384, 389). The Privy Council there observed as follows: "Sections 25 and 26 no doubt form part of a single scheme and their interaction must not be ignored." Section 16 as enacted in the year 1922 ran as follows: "Where any change occurs in the constitution of a firm or where any person has succeeded to any business, profession or vocation, the assessment shall be made on the firm as con stituted, or on the person engaged in the business, profession or vocation, as the case may be, at the time of the making of the assessment." The part material for the purpose of the present case is as follows: "Where any person has succeeded to any business, the assess ment shall be made on the person engaged in the business at the time of the making of assessment." Now, the word "assessment" here clearly refers to the assess ment made in connection with the totality of the income, profits and gains made in connection with such business. It does not refer merely to the head referred to in section

10. Mr. Joshi submitted that the expression "assessment" even here in connec tion with business referred only to the assessment that may be made under the head referred to in section

10. In my view, it was never the intention of the Legislature in enacting section 26 that where there is a case of succession, the person who succeeds should be made liable only in respect of that part of the income, profits and gains of the business which is liable to be included under the head referred to in section 10 and that as regards the rest, the person who has been succeeded would be assessed. In my view, this theory of assessment in compartments sought to be imported in the provisions of sections 25 and 26 is without any basis or foundation. As regards section 26 it has been observed by the Privy Council in the case of Indian Iron and Steel Co. Ltd. v. Commissioner of Income‑tax ((1943) 11 I T R 328), that section 26 is not concerned with the computation of tax, but with the person upon whom the liability is imposed. In my view, reading section 25 as a whole the words "income, profits and gains "appearing in subsection (3) refer to the income, profits and gains made in connection with business under whatever head the same may have to be shown. There is another aspect of the matter to which I will now advert. Under the Act of 1918 as well as under the Act of 1922, various heads of income, profits and gains are mentioned. Sec tion 5 of the Act of 1918 provided as follows: "Save as otherwise provided by this Act, the following clauses of income shall be chargeable to income‑tax in the manner here inafter appearing namely, (i) Salaries ; (ii) Interest on securities ; (iii) Income derived from house property ; (iv) Income derived from business ; (v) Professional earnings ; (vi) Income derived from other sources." Section 6 of the Act of 1922 when first enacted provided as, follows: "Save as otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income‑tax in the manner hereinafter appearing, namely :‑ (i) Salaries. (ii) Interest on securities. (iii) Property. (iv) Business. (v) Professional earnings. (vi) Other sources." Section 6 of the Indian Income‑tax Act, 1922, as it now stands provides as under: "Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income‑tax in the manner hereinafter appearing, namely : ‑ (i) Salaries. (ii) Interest on securities. (iii) Income from property. (iv) Profits and gains of business, profession or vocation. (v) Income from other sources. (vi) Capital gains." It is clear from the above that the nomenclature of some of the heads has changed from time to time and that the Legislature by legislation has amalgamated two heads into one. A scrutiny of some of the sections of the Act as they existed from time to time will show that what was included in some of the heads has changed. By an amendment made by section 9 of the Finance Act 1955, with effect from 1st April, 1955, the head "Income from other sources" covered by section 12 is to include dividends. The result is that in the case of a business where shares of joint stock companies constituted the stock‑in‑trade of the business, dividends received in respect of those shares, which were at one time liable to be shown under the head "Profits and gains of business, profession or vocation" referred to in section 10 would now, after the amendment, have to be shown under the head "Income from other sources" referred to in section

12. In this connection, I may refer to a decision of a Division Bench of this Court in Commissioner of Income‑tax v. Ahmuty & Co. Ltd. ((1955) 27 I T R 63) In that case, Chagla, C. J., and Tendolkar, J., held that in the case of an assessee company which was a dealer in shares which constituted the stock‑in‑trade of the business of the company, the dividend income received by the company was income from business chargeable under section

10. This decision was given before the amendment of 1955. In vies of the amendment made in the year 1955, this dividend income would now have to be shown under the head "other sources" covered by section

12. Section 8 of the Act of 1918 provided that under the head "Income derived from house property " the bona fide annual value of any house property of which the assessee was the owner was required to be shown subject to certain allowances. When we come to the Act of 1922 as first enacted section 9 (1) provided as follows: "9. (1) The tax shall be payable by an assessee under the head `Property' in respect of the bona fide annual value of pro perty consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of his business . . . . . ." The present section 9 provides as follows: "9. (1) The tax shall be payable by an assessee under the head `Income from property' in respect of the bona fide annual value of property consisting of any buildings or lands appurte nant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax . . . . .". These different provisions in connection with property also indicate that what was liable to be included under a head has varied. Some of the heads do not include all that would ordinarily be covered by the words used in describing the head. For instance, under the head "Salaries" referred to in the present section 7 of the Act of 1922 the salary received by a servant of a foreign Government is not liable to be shown under this head. Similarly as regards the head "Interest on securities", the inte rest on securities issued by a foreign Government is not liable to be shown under that head. In my view, when the Legis lature enacted section 25 and legislated in connection with the discontinuance of a business and provided for certain reliefs in connection with the income, profits and gains of such business, the Legislature was not contemplating any one particular head of income, profits and gains with its varying nomenclature and varying content. In this connection it would be pertinent to note that where the Legislature intended to refer to a particular head of income, it has been careful enough to refer to the same by describing it as the "head," by using the specific words by which the head is known with the first letter thereof in capital and by putting those words into inverted commas so that no confusion may arise as regards the intention of the Legislature. I will refer in this connection to the provisions contained in the Act of 1922 as first enacted. Section 18 as first enacted pro vided as follows: "18. (1) Income‑tax shall, unless otherwise prescribed in the case of any security of the Government of India, be leviable in advance by deduction at the time of payment in respect of income chargeable under the following heads: (i) `Salaries' and (ii) `Interest on securities.' (2) Any person responsible for paying any income chargeable under the head `Salaries' shall, at the time of payment, deduct income‑tax on the amount payable at the rate applicable to the estimated income of the assessee under this head . . . . . ." Section 21 (a) provided as follows: "the name and, so far as it is known, the address of every person who was receiving on the said 31st day of March, or has received during the year ending on that date, from the authority, company, body, association or private employer, as the case may be, any income chargeable under the head `Salaries' of such amount as may be prescribed ; . . . . ." Subsection (5) of section 46 provided as follows: "46. (5) If any assessee is in receipt of any income charge able under the head `Salaries', the Income‑tax Officer may require any person paying the same etc." A reference may also be made in this connection to sections 7 to 12 of the Act of 1922. Numerous such instances can be cited from the Act as it now stands. If we examine the provisions contained in section 25 (3) we have the words "business, profession or vocation". Under the Act of 1918 the word "business" by itself did not describe any head. The head under section 9 of the Act of 1918 was "Income derived from business". The words "pro fession or vocation" appearing in subsection (3) did not constitute the language of the head under section 10 of the Act of 1918. The head under section 10 of the Act of 1918 was "Professional earnings", though it included profits of any vocation. When we come to the Act of 1922 as first enacted the word "Business" represented the exact nomenclature of the head covered by section

10. As regards the words "profession or vocation" they did not represent any head under the Act of 1922 as first enacted. The head under section 11 as originally enacted was "Professional earnings". As a result of the legislative amend ments the head "Professional earnings" has now been completely abolished. By the amending Act VII of 1939 the head under section 10 has been altered to "Profits and gains of business, profession or vocation". There is a temptation to equate the words "business, profession or vocation" with the head "Profits and gains of business, profession or vocation" now appearing in section 10 of the Indian Income‑tax Act, 1922, after the amend ment made in 1939, because the words "business, profession or vocation" appear in juxta‑position. But when these words were used in the Act of 1922 at the time when that section was first enacted, there was no such head like "profits and gains of business profession or vocation." In my view, when the Legislature used the words "business, profession or vocation" in section 25 (3) and referred to the income, profits and gains thereof, it was not referring to any particular head of income. If the Legislature intended in section 25 (3) to refer to any particular head or heads, it would have done so and used apt language for the purpose as it has done in various other provisions of the Act. In order to visualise the effect of what Mr. Joshi contends for, I will take up the case of a company whose sole business was to deal in securities which constituted its stock‑in‑trade. If whilst the Act of 1918 was in operation that company's assessable income for any year was computed at Rs. 15 lakhs and tax had been paid thereon and if the said sum of Rs. 15 lakhs had been computed by showing Rs. 24 lakhs under the head interest on securities" and by showing Rs. 9 lakhs as loss under the head "Income derived from business," would it be possible to say that in respect of the business of the company no tax has been charged under the‑Act of 1918 within the meaning of section 25 (3) of the Act of 1922? It would be an unrealistic and far‑fetched construction to say that the company carried on business on which no tax was charged. In my view it could not have been the intention of the Legislature not to give relief to such an assessee merely because its profits have been entered under a head other than that covered by section 9 of the Act of 1918. To take another illustration : If the business of an assessee company consisted of sale and purchase of shares of joint stock companies which constituted its stock‑in- trade, under the present section 12 the income from the dividends would have to be shown under the head "Income from other sources". That income prior to the amendment was liable to be shown under the head "Profits and gains of business, profession or vocation" referred to in section

10. If the assessee had paid tax in connection with such business under the Act of 1918 and discontinues the said business, could it be said that the assessee is not entitled to relief under section 25 (3) in respect of income from dividends merely because it is now required to be shown under section 12 instead of under section 10? In my view, the Legislature when it referred to income, profits and gains in section 25 (3) in connection with business which has been dis continued, did not refer to any particular head of income with its varying content. I shall now deal with the two cases referred to by Mr. Joshi one Gopi Mohan & Sons v. Commissioner of Income‑tax ((1947) 15 I T R 220) and the other Ambalal Himatlal v. Commissioner of Income‑tax ((1951) 20 I T R 280). The first is a judgment of a Division Bench of the Allahabad High Court and the second is a judgment of a Division Bench of this Court. In none of these cases the points which have been canvassed before me were canvassed or were even present in the minds of the learned Judges who delivered those judgments. The facts in the case Gopi Mohan & Sons v. Commissioner of Income‑tax were that a Hindu undivided family which had been assessed in respect of its income from property became divided in the previous year relevant to the assessment year 1941‑

42. That partition was recognised by the Income‑tax Officer. An application was made by one of the separated members of the family claiming relief under section 25 (3). From the facts it is clear that there was no business profession or vocation that had at any time been carried on by the Hindu undivided family. It is stated in the course of the judgment that it was not disputed that the Hindu undivided family was assessed under the Indian Income‑tax Act, 1918, but the assessment was made only in respect of income from property. On the facts of that case section 25 (3) could not possibly apply. In that case an argument was advanced that a landlord who lives merely on rental income should be deemed to be exercising a vocation. In dealing with that argument the learned Judges observed that the method of computation of income from property had been laid down in section 9, while that for the computation of income from business, profession or vocation had been described in section

10. They further observed as follows at page 223: "From this it is clear that the expression `business, profession or vocation' used in section 25 (3) relates to that head of income, which has been dealt with in section 10, and is quite distinct from the head of `income from property' which has been men tioned in section 9." To the extent that the judgment contains observations which are contrary to the view I have taken, with respect, I do not agree with the same. The facts in respect of the case Ambalal Himatlal v. Commis sioner of Income‑tax ((1951) 20 I T R 280, 286), were the following : The assessee, a Hindu undivided family, carried on three separate businesses, viz., (1) money‑lending, (2) running a ginning factory and (3) a share business. That family was disrupted in 1943 and the businesses were divided among its members. It was found that only in respect of the money‑lending business the Hindu undivided family had paid tax under the Act of 1918. The assessee claimed the benefit of section 25 (4) in respect of all the businesses carried on by it up to the date of partition. The learned Judges held that the benefit accrued only in respect of the business in connection wherewith tax had been paid, viz., the money‑lending business. In the course of his judgment Chagla, C. J observes as follows: "Therefore, the whole emphasis in subsection (4) is not upon the assessee so much as upon the particular business, profession or vocation which was carried on and which was subjected to tax under the Act of 1918. One might almost say that the relief contemplated to be given was not to the assessee so much as to the particular business . . . . . . " There are observations in that case which go to show that the learned Judges considered that the Legislature in section 25 (4) contemplated profits and gains of business, profession or vocation contemplated by section

10. Mr. Joshi very strongly relied upon the words in that judgment which appear at page 285 where Chagla, C. J., observes: "What the Legislature intended by using the expression `income, profits and gains' was the profits and gains of the business or profession contemplated by section 10 and not the total income of the assessee because when we come to the proviso to section 25, subsections (3) and (4), it provides as follows : . . . . . " Mr. Joshi further relied upon the following passages from that judgment; "Therefore, here we have the expression `income, profits and gains' used in juxta‑position with `business, profession or vocation' and there can be no doubt as far as this provision is concerned that what the Legislature was providing for was the profits and gains of the business, profession or vocation con templated by section 10." At the time when the aforesaid decision was given, the provision relating to the inclusion of income from dividends under the head "Income from other sources" in section 12 had not been enacted. Ordinarily speaking, in connection with a large majority of businesses, the profits and gains of such businesses would be liable to be included under the head "Profits and gains of business, profession or vocation" covered by section

10. It is only in those cases where securities constitute the stock‑in‑trade of a business that the question arises of including the interest on securities which forms part of the Profits of such business under the head "Interest on securities" referred to in section 8, and it is only in cases where the business consists of purchases and sale of houses that the question would arise of including the income from such houses which forms part of the profits of such business under the head "Income from property" referred to in section 9 of the Act. The learned Judges without any argument might well have thought that all profits and gains of business were liable to be shown, under section

10. In the absence of any argument as to the heads under which profits and gains of a business may have to be shown this judgment cannot be regarded as an authority for the proposi tion for which Mr. Joshi is contending. I cannot regard that judgment as a considered expression of an opinion on the matter with which I have to deal and I cannot regard it as having any binding authority on me, on the point which I have to decide. In the course of the arguments advanced before me, there was a controversy between counsel as regards the section or sections which constituted the charging section or sections under the Act of 1918 and under the Act of 1922 as first enacted. There is no necessity for me to give any decision on that question in the present reference. Mr. Joshi had argued that in section 25 (3) the use of the words "on which tax was at any time charged" when read along with the provisions contained in the Indian Income‑tax Act, 1918, indicated that what the Legislature was referring to was the class of income specified in section 9 of the Indian Income‑tax Act of 1918. He urged that section 5 of the Act of 1918 provided for various classes of income therein set out which were charge able to income‑tax and that the words "tax . . . charged under the provisions of the Indian Income‑tax Act, 1918" referred to the class of income that was chargeable to income‑tax under the provisions contained in the aforesaid section

5. Mr. Joshi there from sought to deduce that the tax charged that is referred to in section 25 (3) is the one charged in respect of the classes of income falling only under the heads "Income derived from business" and "Professional earnings." There is no reason why the tax charged should not refer to other classes of income referred to in the aforesaid section 5, if such income was derived from the activity business. In the result, I answer the question as reframed in the affirmative. Out of the three Judges including myself, who have dealt with this reference, Mr. Justice S. T. Desai and myself have answered the question in the affirmative whilst Mr. Justice Tendolkar has answered the question in the negative. The decision of the Court, having regard to the provisions of section 66‑A of the Indian Income‑tax Act, 1922, is that the question is answered in the affirmative. The applicant to pay the costs. Costs to include the costs of the hearing before Mr. Justice Tendolkar and Mr. Justice S. T. Desai. Reference answered in the affirmative.