Gill FJ:

This is a case stated by the Special Commissioners of Income Tax arising out of an appeal to them against the assessment of income tax by the respondent on the appellants' income for the years 1966 and 1967.

No evidence was adduced at the hearing before the special commissioners, as an agreed statement of facts was submitted to them, together with an agreement dated 11 November 1966 entitled "Reconstruction Agreement" entered into between the appellants and the RT Plantations Sdn. Bhd. A statement dated 21 September 1971 signed by the Chief Accountant of Plantations Agencies Sdn. Bhd. was also submitted to them as an agreed document.

Briefly stated, the facts of the case are that by an agreement dated 11 November 1966 the appellant company, which was incorporated in Hongkong with its registered office there, agreed to sell to the RT Plantations Sdn. Bhd, which was incorporated in the State's of Malaysia on 9 December 1965 and is a wholly owned subsidiary company of the appellants, the whole of the appellants' business as a going concern on the terms and conditions as set out in the said agreement. The appellants were the owners of five rubber estates known as BS Estate, C Estate, S Estate, T Estate and R Estate. The income from the paid rubber estates constituted the business income which the appellants had in Malaysia and which the Income Tax Department had been treating as one source.

Paragraph (f) of the recitals to the agreement reads:-

It has been agreed between the vendor and the subsidiary that for the purposes of this agreement the said business shall be divided into five parts represented by the five estates hereinbefore referred to, and that with a view to the subsidiary acquiring from the vendor the whole of the said business with effect from the

commencement of business on the dates as hereinafter provided the vendor shall cease to carry on that portion of the said business represented by each of the said estates for its own account and that completion date for the sale of that part of the said business represented by each of the said five parts shall be the said dates as hereinafter provided."

Clause 1 of the agreement was to the effect that "the relevant completion date" of the sale of each of the five estates shall be as follows:-

Bukit Sembilan Estate - 1 October 1966

Cheng Estate - 1 May 1967

Senawang Estate - 1 July 1967

Tebong Estate - 1 September 1967

Repah Estate - 30 September 1967.

Clause 3 of the agreement states:

Subject as hereinafter provided the said sale and purchase shall in the case of Bukit Sembilan Estate be deemed to have been made and carried into effect and in all other cases shall be made and carried into effect in the case of each of the said parts of the said business as at the relevant completion date and possession of the property agreed to be sold hereunder shall be given by the vendor to the subsidiary as soon as possible thereafter in each case and the vendor shall at each relevant completion date be deemed to have ceased or shall cease to carry on the relevant part of the said business which shall thenceforth have been or be carried on by the subsidiary, to the intent that the subsidiary shall commence business of owing and managing rubber estates on the 1 October 1966, and the vendor shall finally cease to carry on the said business on the 30 September 1967."

Clause 6 of the agreement provided that "so soon as possible after the relevant completion date in each case the vendor shall execute and do and procure all other necessary parties (if any) to execute and do all such further deeds, assurances, acts and things for vesting the property hereby agreed to be sold and the said premises in the subsidiary and giving to it the full benefit of this agreement".

The question for determination by the special commissioners was whether the provisions of para. 104(a) of Sch 9 to the Income Tax Act, 1967, as amended by the Income Tax (Transitional Provisions) O