Shearer, J.

1. This is a reference made under Sec. 66(1) of the Indian Income-tax Act by the Income tax Appellate Tribunal, Calcutta Bench. The assessees are a company known as Pursa Limited, which was incorporated, under the Indian Companies Act in 1905 and which then acquired a property in Champaran known as the Pursa Indigo Concern. In or about 1876 the Pursa Indigo Concern had. obtained from tile Bettiah Raj a mukarrari lease of certain villages in the immediate vicinity of Pursa and it subsequently acquired rights of occupancy in various other parcels of land in the locality. Under the mukarrari lease the Bettiah Raj bad an option of repurchase but in 1905 it apparently, did not choose to exercise this option and the mukarrari lease was assigned to the assessees. The assessees constructed buildings and installed plant and machinery for the purpose of manufacturing sugar. This business was regularly carried on until 1943 when, in consequence of the disturbances which had taken place in the previous year, the company decided to wind it up and entered into negotiations with Messrs Dalmia Jain & Co. with a view to selling the sugar factory to them. Prior to this the manage