The assessment for income tax should be made as if it were one which was effected 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 March 3, 1938, the main purpose of the company being to take over and purchase as a going concern the business of Jaidayal Sagarmal together with land, buildings, machinery, and other appurtenances attached thereto. After the companys incorporation a sale deed was executed on March 4 , 1938, by which, in vonsideration of a 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 good will of the business and the right to use the name of Krishna Mills and Press and benefit of all contracts and all legal incidents of the Krishan Mills. The company has carried on that business ever since it was acquired on March 4, 1938.

On June 10, 1939, a notice was served upon the company u/s 34(1) of the income tax Act in respect of an assessment which should have been made in the year 1938-39. On August 20, 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 form September 29, 1936, to October 8, 1937. It has been held by the Appellate Tribunal the the company is the successor to the firm of Jaidayal Sagarmal and alone is liable to be and had been assessed in respect of the profits during the year, the subject of assessment.

Two questions which now come for consideration are : (i) 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 correctlyu made on the basis of Section 26(2) as it stood before it was amended by the income tax Act of 1939 ?

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 of 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. 8,860-15-9 and the difference between the expenses and the receipts is the sum of Rs. 32,580-14-9. Among the receipts under the heading "Hemp a/c," is a sum of Rs. 5,353-8-3. In the assessment a deduction has been made, under the head of "Profit from dealing with hemp (not taken by this company)," of Rs. 5,354/-. From this it is argued that the company did not succeed to the firs 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 March 4, 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 good-will of the business and the right to use the name of Krishna Mills 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 incorporated and obtained by means of a sale deed the assignment of the assets of the firm, its managing agents wrote on June 30, 1939, as follows :-

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

It has been conclusively shown that the company are the successors to the firm and