Judgement Appeal (No. 39 of 1944) from a judgment of the High Court (October 1, 1941) delivered on a reference made under s. 66, sub-s.2, of the Indian Income-tax Act, 1922, by the Commissioner of Income-tax, Bombay, Sind and Baluchistan. The following facts are taken from the judgment of the Judicial Committee The question raised by this appeal was whether the word "discontinued" in s. 25, sub-s. 3, of the Indian Income-tax Act, 1922 (hereinafter called the 1922 Act), as amended by the Indian Income-tax (Amendment) Act, 1939 (hereinafter called "the amending Act"), meant only a complete cessation of the business or whether it also included the case of discontinuance of the business by the person formerly carrying it on as the result of the transfer or assignment of that business to another person who thereafter carried it on. In the case under appeal the High Court at Bombay (Beaumont C.J. and Kania J.) gave the wider meaning to the word in Meyyappa Chettiar v. Commissioner of Income-tax, Madras (I. L. R. [ 1944] M. 166.), the High Court at Madras gave it the narrower meaning. The respondent, P. E. Poison, had from some date before 1918 until January 1, 1939, carried on business in coffee, butter, flour and casein under the style of Poison Manufacturing Company. He had made profits and had been charged to tax under the Income-tax Act, 1918. On January 1, 1939, he assigned the business to Poison, Ld., which thereafter carried it on. Part I. of the amending Act, which included the amendments of ss. 25 and 26 of the 1922 Act, came into force on April 1, 1939, by virtue of Notification No. 7 of the Central Government, dated March 18, 1939. In May, 1939, the Income-tax Officer, Companies Circle, Bombay, issued a notice to the respondent under s. 22, sub-s. 2, of the 1922 Act for the assessment year 1939-40, and on August 4, 1939, the respondent made a return which contained an item of Rs. 1,64,726 in respect of income from his business for the previous year, that was, the year 1938. Before any assessment was made he submitted a revised return showing "Nil" under all items. 1,64,726 in respect of income from his business for the previous year, that was, the year 1938. Before any assessment was made he submitted a revised return showing "Nil" under all items. As his covering letter showed, he based that return on a claim to be entitled to the benefit of the provisions of s. 25, sub-s. 3, of the 1922 Act as amended by the amending Act. That claim was rejected by the Income- Tax Officer who, on November 29, 1939, passed an order under s.23, sub-s.3, of the 1922 Act assessing the respondent to tax on a total income which included the item of Rs.1,64,726 in respect of the business. The respondent appealed to the Appellate Assistant Commissioners who, by an order passed on March 30, 1940, dismissed the appeal. The respondent thereupon applied to the Commissioners of Income-tax, Bombay, Sind and Baluchistan, to review the assessment or to refer to the High Court for its decision the following questions of law— "(1) Whether on the facts of the case your petitioner [the respondent] is entitled to the benefit of s. 25, sub-s.3, of the Income-tax Act? "(2) Whether in view of the provisions of the said s.25, sub-s.3, no tax is payable by your petitioner [the respondent] in respect of his income from business of Poison Manufacturing Company for the calendar year 1938 liable to assessment in respect of the financial year 1939-40?" The Commissioner, expressing his own opinion that the respondent was not entitled to any relief under the section, on June 20, 1941, duly referred the case to the High Court at Bombay. That court, on October 1, 1941, delivered judgment answering both questions in the reference in the affirmative. From that judgment the Commissioner of Income-tax appealed, contending that the respondent was not entitled to the relief claimed and that the referred questions should be answered in the negative. The relevant statutory provisions appear from the judgment of the Judicial Committee. 1945. Apr. 10, 11. Tucker K.C. and Khambatta for the appellant. This appeal raises a short but important point on which there has been a conflict of view in the Indian High Courts. Under the Indian Income-tax Act, 1918, a business was assessed in every fiscal year on the profits of that year. 1945. Apr. 10, 11. Tucker K.C. and Khambatta for the appellant. This appeal raises a short but important point on which there has been a conflict of view in the Indian High Courts. Under the Indian Income-tax Act, 1918, a business was assessed in every fiscal year on the profits of that year. When the Income-tax Act of 1922 came into force, then for the first time a business was assessed on the income of the previous year, so that in 1922 an owner was assessed on the profits of 1921. The result was that the profits of the business for the year 1921 were taxed once under the 1918 Act, and taxed again in 1922 under the 1922 Act. Under ss. 25 and 26 of the Act of 1922 before it was amended in 1939 there were decisions in three High Courts in India to the effect that a succession— a change of ownership of a business—was not a discontinuance. Commissioner of Income-tax, Bombay v. Sanjana & Co., Ld. (( 1925) I. L. R. 50 B. 87) Kalu Mal, Shori Mal v. Commissioner of Income-tax, Punjab (( 1929) 3 I.T. Cas. 341.); and Hanutram Bhuramal v. Commissioner of Income-tax, Bihar and Orissa (( 1938) 6 I. T. Rep. 290.). Nothing contained in the amending Act has had the effect of altering that meaning of the word "discontinued" in sub-s. 3 of s. 25; it means a discontinuance of the business by cessation only, and does not include the case of a disposal of the business to another person who thereafter carries it on. Section 26, sub-s.2, as amended in 1939, introduced a radical change before the amendment the succession made no difference, but after it each person has to be assessed in the year following the succession on his own share of the previous years profits. The discontinuance provisions both for 1918 and non- 1918 businesses remain in the main prima facie unchanged; s. 25, sub-s. 1, is not altered; s. 25, sub-s. 3, still operates, but only once; s. 26, sub-s. 2, applies, and each can only be assessed in respect of his actual share of the income, profits and gains of the previous year. The discontinuance provisions both for 1918 and non- 1918 businesses remain in the main prima facie unchanged; s. 25, sub-s. 1, is not altered; s. 25, sub-s. 3, still operates, but only once; s. 26, sub-s. 2, applies, and each can only be assessed in respect of his actual share of the income, profits and gains of the previous year. In the year of succession the new owner could not be assessed on the profits of the previous year because he had no share of the profits of the previous year, but in the following year he could be assessed on his actual share of the profits of the year in which the ownership changed. Where the business was assessed under the 1918 Act and a succession took place on or after the commencement of the Amendment Act of 1939, the predecessor, under s. 25, sub-s. 4, gets the same relief as he would have had under s. 25, sub-s. 3, if it had been a case of discontinuance. Before this amendment a 1918 business, where there was a change of ownership, was under the old s. 26, sub-s. 2, and the assessment, in the year of discontinuance was made on whichever happened to be running the business at the time the assessment was made. In the following year the successor was assessed on the whole of the profits of th previous year. It is submitted that sub-s. 4 of s. 25 only operates after the coming into force of the amending Act, and has no application here because at the time when that Act came into operation, April 1, 1939, the respondent was not carrying on his business. Any cases before that date were still entitled to relief under sub-s. 3 of s. 25, but they do not get it until the business is discontinued [On the merger of small businesses reference was made to Bell v. National Provincial Bank of England ([ 1903] 2 K. B. 249; [ 1904] 1 K. B. 149.), and on "discontinued" to Meyyappa Chettiar v. Commissioner of Income-tax, Madras (2).] Before the amendment Act came into force when there was a succession, as opposed to a discontinuance, the right to obtain relief was carried on in the hands of every subsequent owner until the business was finally discontinued, and when that happened the owner of the business got the relief. Now, it is clear from sub-s. 4, that it is only in cases of succession taking place after April 1, 1939, that the predecessor could get the relief once and for all. If the High Court is right, and the respondent gets relief now under sub-s.3 of s. 25, so do Poison, Ld., when they discontinue. That would be the result. Roland Burrows K.C. and Jopling for the respondent. It may be pointed out that the respondent entered into the transaction for the disposal of his business at a date and time when under the law as it then existed he would not have been liable for tax for the year in question at all, and that transaction was completed before the amending Act of 1939 came into operation. The respondent discontinued his business on December 31, 1938, within the meaning of s. 25, sub-s. 3, as amended, and thereby became entitled for the year of assessment 1939-40 to the benefit of that sub-section and to relief from liability to tax in respect of his income for the previous year. It is submitted that Meyyappa Chettiar v. Commissioner of Income-tax, Madras (I. L. R. [ 1944] M. 166.) was wrongly decided. The result of the interpretation which has been contended for on behalf of the appellant is that the respondent has to pay a double tax—he pays tax for the whole period for which he carries on the business plus one year; there can be no doubt about that. Even if the respondent only comes under the old system, then by reason of s.26, sub-s.2, in its original form the assessment should have been on his successor. Whatever may be the position in regard to "business," it is a little difficult in s. 25, sub-s.3, to fit "discontinuance" to "profession" or "vocation" without at least a little strain. There is admittedly no one within sub-s. 4 of s. 25, whose claim to be exempted is as high as the respondents. There are three lines of argument First, that the interpretation of s. 25, sub-s. 4, should be as it were put forward a year. Secondly, that s. 26, sub-s. 2, has no operation before April I, 1939, and therefore does not touch the year 1938, the year in question, which falls under the old system. There are three lines of argument First, that the interpretation of s. 25, sub-s. 4, should be as it were put forward a year. Secondly, that s. 26, sub-s. 2, has no operation before April I, 1939, and therefore does not touch the year 1938, the year in question, which falls under the old system. The third contention is that which has been upheld by the court below on the construction of sub-s. 3 of s. 25—that a business could properly be regarded as “discontinued” for the purpose of s. 25, sub-s. 3, of the amended Act when it had been discontinued by the taxpayer who previously carried it on, notwithstanding that some other person had taken it over. If s. 25 can be so construed as to give the respondent relief, it should be so construed and s. 25, sub-s. 3, is capable of being applied to him on the meaning of the word "discontinued.” That word is capable of bearing the meanings discontinued by a person or ceasing to exist, and where there are two possible constructions effect should be given to that which prevents injustice. Tucker K.C. replied. In assessing the income of this business for the year 1938-39 the law as it stood in 1939-40 must be applied, i.e., the new s. 26, sub-s.2 Maharajah of Pithapuram v. Commissioner of Income-tax, Madras (( 1945) L. R. 72 I. A. 141.). May 29. The judgment of their Lordships was delivered by LORD SIMONDS. This appeal, which is brought from a judgment of the High Court of Judicature at Bombay, raises a difficult question of Indian income-tax law on which different views have been expressed by the High Courts of Bombay and Madras. [His Lordship then stated the facts set out above and continued] It is now necessary to refer to certain provisions of the Indian Income-tax Acts on the interpretation of which this case depends. It must in the first place be borne in mind that under s. 3 of the Income-tax Act, 1922 (which in this respect differs from the English Income Tax Acts), the subject of charge is not the income of the year of assessment but the income of the previous year. This was a change introduced by the 1922 Act. Previously under the 1918 Act the subject of charge was the actual income of the year of assessment. This was a change introduced by the 1922 Act. Previously under the 1918 Act the subject of charge was the actual income of the year of assessment. The result of this change was that, if a business was in existence and earning profits in the year 1921 when the 1918 Act was in force and continued in existence in the year 1922 when the 1922 Act was in force, the owner would pay income-tax twice over on his 1921 profits. It was accordingly necessary in the 1922 Act to differentiate for the purpose of discontinued businesses between those which had, and those which had not, been charged to tax under the 1918 Act. Section 25 of the 1922 Act deals with assessment in the case of discontinued businesses. By sub-s.1 it provides that, where any business on which income-tax was not at any time charged under the provisions of the 1918 Act is discontinued in any year, an assessment may be made in that year on the basis of the income, profits or gains of the period between the end of the previous year and the date of such discontinuance in addition to the assessment, if any, made on the basis of the income, profits or gains of the previous year. This sub-section does not apply to the present case, but reference may be made to it as illustrating the purpose of the Act to make the number of assessments agree with the number of years during which the business has been carried on. Sub-section 2 of s. 25 is an administrative provision. It is upon sub-s.3 that this appeal turns. Before the amending Act of 1939 came into force it was in the following terms — “(3.) Where any business, profession or vocation....on which tax was at any time charged under the provisions of the " Indian Income-tax Act, 1918, is discontinued, no tax shall " be payable in respect of the income, profits and gains of the " period between the end of the previous year and the date of " such discontinuance, and the assessed may further claim that " the income, profits and gains of the previous year shall be " deemed to have been the income, profits and gains of the said " period. Where any such claim is made, an assessment shall " be made on the basis of the income, profits and gains of the " said period, and if an amount of tax has already been paid in " respect of the income, profits and gains of the previous year " exceeding the amount payable on the basis of such assessment, " a refund shall be given of the difference.” The purpose and effect of this sub-section is clearly to give relief to a taxpayer who but for it would in the aggregate be charged with tax once in respect of every years income and twice in respect of one years income. Section 26 of the 1922 Act deals by sub-s.1 with assessments where at the time of making the assessment it is found that a change has occurred in the constitution of a firm, and by sub-s. 2 with assessments where at the time of making the assessment it is found that there has been a succession. It is a section which distributes a tax already charged as between old and new members of a firm, or between the predecessor and the successor in a business. In its original form it provides that in the case of a succession the assessment shall be made on the successor as if he had been carrying on the business throughout the previous year and had received the whole profits for that year. Before the amending Act came into force the words "discontinued" and "discontinuance" in s. 25 of the 1922 Act had been the subject of numerous decisions in the courts of India, amongst them Commissioner of Income-tax, Bombay v. Sanjana & Co., Ld. (( 1925) I. L. R. 50 Bom. 87.), Kalu Mal, Short Mal v. Commissioner of Income-tax, Punjab (( 1929) 3 I. T, Cas. 341.), and Hanutram Bhuramal v. Com missioner of Income-tax, Bihar and Orissa (( 1938) 6 I. T. Rep. 290), and it had been uniformly decided that these words did not cover mere change of ownership but referred only to a complete cessation of the business. Their Lordships entertain no doubt of the correctness of these decisions, which appear to be in accord with the plain meaning of the section and to be in line with similar decisions on the English Income Tax Acts. Their Lordships entertain no doubt of the correctness of these decisions, which appear to be in accord with the plain meaning of the section and to be in line with similar decisions on the English Income Tax Acts. Nor has their correctness been challenged in the judgment under appeal or in the argument before their Lordships. It has, however, been contended that the amendments introduced by the amending Act impose a different interpretation on s. 25, and it is this contention that has been accepted by the High Court at Bombay. The amendments so introduced are as follows — Section 25, sub-ss. 1 and 2 are not touched. Into s. 25, sub-s.3, after the word “discontinued" there are interpolated the words then, unless there has been a succession by virtue of which the provisions of sub-s.4 have been rendered “applicable." A new sub-section 4 is introduced, which is in the following terms— "(4) Where the person who was at the commencement of " the Indian Income-tax (Amendment) Act, 1939, carrying on " any business, profession or vocation on which tax was at any " time charged under the provisions of the Indian Income-tax " Act, 1918, is succeeded in such capacity by another person, " the change not being merely a change in the constitution of a " partnership, no tax shall be payable by the first mentioned " person in respect of the income, profits and gains of the " period between the end of the previous year and the date of " such succession, and such person may further claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period. Where any such claim is made, an assessment shall be made on the basis of the income, profits and gains of the said period, and, if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference." A new sub-section 5 is also introduced, but it is not relevant to the present question. Consequential amendments are made in sub-s. 6. Section 26 has also been substantially amended, but it is convenient to pause and examine the amendments to s. 25 before turning to s. 26. Consequential amendments are made in sub-s. 6. Section 26 has also been substantially amended, but it is convenient to pause and examine the amendments to s. 25 before turning to s. 26. It must first be noted that the new sub-s.4 of s.25 has no application to the respondent. On January 1, 1939, he ceased to be the owner of the business. Therefore he was not carrying it on " at the commencement of " the amending Act. Prima facie, these words mean the date when the Act comes into force, i.e., on April 1, 1939. It is at any rate clear that they cannot mean any earlier date. The scheme of the amendment may then be observed. It is clear enough. Under the unamended Act relief was given in respect of a business, which had been taxed under the 1918 Act, only when it was discontinued. It was thought desirable to extend this relief to the case where there was not discontinuance but there was a succession. Thus on a transfer the transferor or predecessor would get the same relief as he would have got if the business had been discontinued. This provision is made by the new sub-s. 4. But such relief can be given once only in respect of a business. Therefore, when the owner, who transfers, has got relief under sub-s.4, it would not be right for the transferee to get relief under sub-s. 3 if and when the business is discontinued. For this reason the words that have been cited are interpolated in sub-s. 3. This being the clear purpose and effect of the amendments, their Lordships see no reason for thinking that they impose on the word "discontinued" in sub-s. 3 any other than its natural meaning, which had, indeed, received unanimous judicial sanction in the courts of India, and they would further observe that it would only be a compelling context which could by virtue of an amendment require a different interpretation of words so construed, but in fact the amending provisions so far from raising any doubt as to the meaning ascribed to "discontinued" appear to enforce that meaning. Under the unamended Act, s. 25, sub-s.3, gave relief in the event of discontinuance the amendment introduced a qualification, not enlarging or altering the meaning of discontinuance but providing that, if there was a succession in respect of which relief was given, there should not be relief on discontinuance. To construe this provision as meaning that "discontinuance" includes succession appears to do violence to plain language. It is, however, to s. 26 and its amendments that much argument was directed. Sections 25 and 26 no doubt form part of a single scheme, and their interaction must not be ignored. But s. 26 is primarily directed not to the circumstances in which relief from taxation is given, but to the apportionment of tax where relief is not given. Its application to the case under appeal is not in doubt. It is sub-s. 2 of s. 26 as amended by the amending Act which applies, and, inasmuch as at the time of making the assessment, i.e., in November, 1939, the respondent had been succeeded in carrying on the business by the company, each of them became assessable in respect of his actual share, if any, of the income, profits and gains of the previous year. If the sub-section had not been amended, the company as the successor would have been assessable as if it had been carrying on the business throughout the previous year and had received the whole of the profits of that year. The language of s. 26 both in its original and in its amended form appears to be unambiguous, and there is nothing in it that can throw any doubt on the interpretation which must be given to s. 25. It is true that in the result the respondent may have suffered a disadvantage. When he transferred his business to the company on January 1, 1939, he presumably did so on the footing of the existing law, including the unamended s. 26, so that he could count on the company as successor being assessed to the profits of the business of the previous year. It probably did not matter to him, therefore, that he would get no relief under s. 25, sub-s. 3. It probably did not matter to him, therefore, that he would get no relief under s. 25, sub-s. 3. But by the time the assessment was made in November, 1939, the law had been changed, and as the result of the amended sub-s. 2 of s. 26 he became liable to an assessment not contemplated by him or his transferee. The relief that is given on discontinuance might ultimately accrue to the company but that, he justly says, is not his relief. It is possible that there is here a flaw in the legislative scheme which requires remedy. It would appear prima facie at least that in such a case the burden of so-called double taxation falls on the taxpayer notwithstanding the plain intention of the section to avert it. But this is a consideration which cannot be allowed to influence the clear interpretation of the section, though it may well afford grounds for amending legislation. In the result, their Lordships agree with the reasoning and the decision of Leach C.J. and Patanjali Sastri J. in Meyyappa Chettiar v. Commissioner of Income-tax, Madras (I. L. R. [ 1944] M. 166.), rather than with that of the High Court of Bombay. The appeal must be allowed and the two questions referred to the High Court by the Commissioner of Income-tax must be answered in the negative. The respondent must pay the appellants costs of this appeal and of the reference. Their Lordships will humbly advise His Majesty accordingly.