Judgment

SUBBA RAO, J. : This appeal by special leave is preferred against the order of the Madras High Court in a reference made to it by the income-tax Appellate Tribunal under S. 66 (1) of the Incometax Act, 1922, hereinafter called the Act.

2. The facts leading up to the reference and relevant to the present enquiry are as follows. The Free Press of India (Madras) Ltd., hereinafter called the Free Press Company, was a private limited company carrying on business as printers and publishers of certain newspapers, namely, "Indian Express", "Dhinamani" and "Andhra Prabha", at Madras, "Eastern Express " and "Bharat" at Calcutta and "Sunday Standard" and "Morning Standard" at Bombay. On August 31, 1946, the Free Press Company passed a resolution transferring to the Express Newspapers Limited, a new company formed on or about April 22, 1946, hereinafter called the assessee-company, the right to print and publish the said newspapers from September 1, 1946, letting out its machinery and assets and authorizing the assessee-company to collect the book debts and pay off the liabilities of the Free Press Company. The assessee-company accordingly started publishing newspapers from September 1,