SATYANARAYANA RAO, J.

In pursuance of the direction of this Court under Section 66(2) of the Income-tax Act, the Income-tax Appellate Tribunal referred the following question of law to this Court : ---

" Whether when a Hindu undivided family on a partition is succeeded to by one or more of its members in respect of the family's share in the business of a foreign firm and the family was assessed in respect of that share under the Act of 1918, the firm not having been assessed, is the family entitled to relief under Section 25(4) of the Income-tax Act as amended by the Amendment Act of 1939 ? " *

The facts are not in dispute. The assessee was an undivided Hindu family and as a partner carried on money-lending business at Muor in the Federated Malay States. The profits of the money-lending business received by the joint family in British India were assessed to income-tax under the Act of 1918 and subsequently. There was a partition in the family and at that partition, the share of the family in the said business at Muor was allotted to two of the members of the family. It was claimed that as a result of the partition and the allotment of the share of the business to two of the members of the family there was a succession within the meaning of Section 25(4) of the Income-tax Act to the share of the profits and that therefore the Hindu undivided family was entitled to relief under Section 25(4). The Tribunal accepted the contention of the assessee and granted relief under Section 25(4). The short question is whether the Tribunal was right in applying Section 25(4) to the facts of the case

That the partition brought about succession to the business within the meaning of sub-clause (4) of Section 25 is now common ground and it is not open to us to canvass the soundness of that view, as that question is not before us. One of the requirements, therefore, of Section 25(4) is undoubtedly satisfied on the facts of the case. The only point on which there is controversy is whether the assessee is a person who, at the commencement of the Indian Income-tax (Amendment) Act (VII of 1939) carried on any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918. The question referred to us makes it clear that the foreign firm at Muor which carried on money-lending business and in which the joint family was a partner was not assessed to income-tax. The share in the profits of the joint family which were received in British India were alone subject to the charge and not the business. The Income-tax Act of 1918 applied as provided by Section 3 to the income of an assessee from whatever source it is derived if it accrued or arose or was received in British India. The definition of assessee in Section 2(2) of that Act included a firm and the firm as such was treated as a unit for assessment of its business provided its income accrued or arose in British India. A foreign firm could not be assessed in respect of its business to any extent under that Act. Section 5 of the Act of 1918 which defined the classes of income chargeable to income-tax analogous to the present Section 6 included among the classes income derived from business and also income derived from other sources. Section 9 of the same Act enumerated the permissible allowances in computing the profits of the business under the head " income derived from business ". These deductions could not apply to a foreign business and the income of such foreign business could not be brought and could not be charged to income-tax to any extent under the Act of 1918. The only extent to which the profits or gains of such business could be assessed to tax was only if the profits were received in British India. Section 4 of the present Act, of course, altered the position to a large extent. Even under the Act of 1918 it was held that there could be no second receipt of the profits in British India when once the profits were received