The main legal point established in the judgment is that the assessment of income tax should be made based on the provisions of the Income Tax Act as if it were in the year in which escapement was obtained.

JUDGMENT

Gentle, J. - 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 all 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 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 goodwill 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 Krishna Mills. The company has carried on that business ever since it was acquired on 4th March 1938. On 10th June 1939, a notice was served upon the company u/s 34 (1), income tax Act, in respect of an assessment, which should have been made in the year 1938-39. On 20th August 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 September 1936 to 8th October 1937. It has been held by the appellate tribunal that the company is the successor to the firm of Jaidayal Sagarmal and alone is liable to be and has been assessed in respect of the profits during the year, the subject of assessment.

2. Two questions which now come for consideration are: (1) Whether on the facts found by the appellate tribunal a case of succession as contemplated by Section 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 Section 26 (2) as it stood before it was amended by the income tax 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 to 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 u/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. 8860-15-9 and the difference between the expenses and the receipts is the sum of Rupees 32,580-14-9. Among the receipts, under the heading "Hemp a/c," is a sum of Rs. 5353-8-3. In the assessment a deduction has been made, under the head of "Profit from dealing with hemp (not taken over by this company)," of Rs. 5354. From this, it is argued that the company did not succeed to the firm, as it did not take over its hemp business. What the reasons were for. This sum being deducted does not appear. By the sale deed of 4th March 1938, which was executed by the company and in respect of which, according to the deed, one lac of rupees was paid, the company acquired all the immovable properties including land, buildings, machinery and so on, together with the goodwill of the business and the right to use the name of Krishna Mill and Press and the benefit of all contracts and legal incidents. Whilst one item of gross profit was omitted, in my view that is not sufficient to show that the company are not the successors to the firm. But the matter does not rest there Fifteen months after the company was incor-porated and obtained by means of a sale deed the assignment of the assets of the firm, its managing agents wrote on 30th June 1939 as follows:

The present business of Krishna Hydraulic Press Ltd., was taken over from Messrs. Jaidayal Sagar-mal of Nandsah Mohalla, Benares, on 3rd March 1938 as a running concern and this company is working the press on and from the same date i.e., 3rd Maroh 1938.

4. It has been conclusively shown that the company are the successors