SRINIVASAN J. - The question which stands referred to this court under section 66(2) of the Act is :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Rs. 48,444 should be assessed to tax under section 10(2)(vii) of the Income-tax Act ?'
The assessee, which is a firm consisting of two partners, was operating transport buses. It had twenty-four route buses. The assessment year in question is 1949-50, the relevant accounting year being the calendar year 1948. On April 14, 1948, the assessee sold three buses to one Subramania Mudaliar. On July 9, 1948, the business was closed. Ten buses were sold to one Dhanmul Sowcar and the sale proceeds were received on July 8, 1948. It is stated that the remaining buses were distributed between the two partners as part of the division of assets of the dissolved partnership.
It is not in dispute that on the basis of the written down value of the buses there was a profit on the sale of the ten buses to Dhanmul Sowcar which was computed at Rs. 48,444. The short question is whether this amount is taxable under section 10(2)(vii).
The Appellate Assistant Commissioner held that the buses were sold to Dhanmul Sowcar on June 28, 1948, before the appellants business came to an end. The appellate authority declined to accept the contention that the buses were sold in the course of the winding up. Reliance was apparently placed upon the fact that an agreement had been entered into with Dhanmul Sowcar on June 28, 1948, that is, a few days prior to the closure of the business. The Appellate Assistant Commissioner further held that section 10(2)(vii) as amended applied and that even if the buses had been sold after the closure of the business, the profit computed would be liable to tax. This decision was accepted as correct by the Appellate Tribunal in the appeal before it.
When this court was moved under section 66(2) of the Act, it was urged that the Tribunal had failed to decide the question, whether independent of the fact when the business was closed, a sale, in anticipation of the closure of the business and shortly before it, fell outside the scope of section 10(2)(vii) of the Act. The Tribunal was also directed to record an express finding whether the above aspect of the matter was either pressed for adjudication or was considered by the Tribunal.
In the statement of the case, the Tribunal has stated that no contention was pressed before it that the sale was in anticipation of the closure of the business, nor was there any positive evidence that the sale was of that nature.
Mr. Ramamani, learned counsel for the assessee, has dealt with the question in two aspects. Firstly, he claims that this was a sale in the course of the winding up of the business, whether or not the actual sale was factually a few days before the last entries were made in the books of account of the firm. Secondly, he claims that the amended provision will not apply to the facts of this case.
As a question of fact, it has been determined by the department and the Tribunal that the sale did not take place after the closure of the business, nor has the existence of any material relevant thereto been pointed out to us by the learned counsel to show that though the sale was anterior in point of time to the actual closure represented by the closing of the accounts, it was a transaction in the course of the winding up of the company. It is not denied that after the sale of these ten buses to Dhanmul Sowcar, the assessee did in fact carry on the transport business with the remaining buses till the firm was put an end to by the division of assets between the two partners on July 9, 1948. In the absence of any clear evidence, such as, for instance, of an agreement between the partners purporting to dissolve the firm with effect from a particular date and taking steps ancillary thereto, the Tribunal was justified in concluding on a question of fact that the business continued to be in operation till July 9, 1948, so that the sale of these ten buses was during the continuance of the business. Section 10(2)(vii), which brings to tax a profit of this description, was amended in 1949. Prior to the amendment, the second proviso thereto read thus :
'Provided further that where the amount for which any such building, machinery or plant is sold exceeds the written-down value, so much of the excess as does not exceed the difference between the original cost and the written-down value shall be deemed to be profits of the previous year in which the sale took place.'
Since section 10 deals with the method of computation of the profits or gains of any business 'carried on' by an assessee, this provision had been interpreted to mean that unless the sale of the machinery or the plant took place during the continuance of the business the profit could not be brought to tax; for, if the sale was after the cessation of the business, it would not be profit of a business which was 'carried on' by the assessee. In 1949 this provision was amended by section II of the Taxation Laws Act, 1949 (LXVII of 1949), by inserting the words 'whether during the continuance of the business or after the cessation thereof'. Even assuming then that these buses were sold after the cessation of the business, if this amended provision applied, there is no doubt that the profits would be taxable. Mr. Ramamani contends that this provision came into force only in the middle of the assessment year and that, therefore, that not being the law as on the date of the commencement of the assessment year, the amended provision cannot be invoked for the purpose of taxing this profit. Mr. Ramamani concedes however that this enactment was preceded by two Ordinances. The Taxation Laws Amendment Ordinance (IX of 1949) was enacted on the 10th of June, 1949. By clause (2) thereof, Chapter II was brought into force with effect from March 31, 1949. The above amendment of section 10(2)(vii) inserting the words, 'whether during the continuance of the business or after the cessation thereof', occurs in Chapter II. This Ordinance would normally have expired at the end of six months from the date of promulgation thereof. Immediately following it, that is to say, on 10th December, 1949, Ordinance XXXIII of 1949, the Taxation Laws Amendment Second Ordinance, 1949, was promulgated which repeated the provisions of the earlier Ordinance. On the 31st December, 1949, the Taxation Laws (Extension to the Merged States and Amendment) Act, 1949, was passed and received the assent of the Governor-General. By section 11 of this Act, section 10(2) (vii) of the Indian Income-tax Act was amended in the manner in which the earlier Ordinances had purported to amend it, Section 34 of this Act repealed Ordinance XXXIII of 1949. What Mr. Ramamani contends is that the Act of the legislature, which finally amended section 10(2)(vii), came into force only on the 31st December, 1949, and since the earlier Ordinances had been repealed, though those Ordinances had effected the same amendment in section 10(2)(vii), it could not be deemed that that was the law as at the commencement of the assessment year, that is, on April 1, 1949. According to him, if we understand him aright, the earlier amendment of section 10(2)(vii) by the Ordinances in question ceased to have any effect whatsoever, once those Ordinances were repealed by the Act which replaced them.
We are unable to accept this argument. It is not necessary to refer to the several provisions of the General Clauses Act which really nullify the above argument. It will be sufficient to refer to section 6 of the General Clauses Act, which clearly provides that where any Central Act repeals any enactment previously made, then unless a different intention appears, such repeal shall not affect the previous operation of any enactment so repealed. The Ordinance effected a change in the law effective from 1st April, 1949, and before the Ordinances lapsed, an Act of the legislature was passed continuing the amendments. The mere fact that the Ordinance was repealed by the later enactment does not mean that the Ordinance which effected a change was rendered a dead letter even during the period when it was lawfully in force.
A similar question came before us in T.C. Nos. 122 and 142 of 1961. Section 5C(2) of the Madras General Sales Tax Act was first introduced by Madras Ordinance 1 of 1957 and thereafter replaced by Madras Act I of 1957. The Act was passed on May 13, 1957, and the contention was advanced that the Ordinance which was promulgated on April 1, 1957, having been replaced by that Act on May 13, 1957, the turnover between April 1, 1957, and May 13, 1957, would not be covered by either the Ordinance or the Act, inasmuch as the Ordinance had been repealed and the Act did not retrospectively cover that period. We examined the provisions of the Act and the Ordinance and the provisions of the Madras General Sales Tax Act and repelled this argument. The general principle that an Ordinance promulgated by the Governor has the same force as an Act of the legislature was emphasised and it was pointed out that the repeal of the Ordinance amounted to the repeal of an enactment which attracted the provisions of the General Clauses Act. The result in our view was that the taxability which was enacted by the Ordinance with effect from April 1, 1957, was maintained by the ensuing Act which replaced the Ordinance. The principle of that decision fully applied to the present case and it follows that though the Act which was passed on December 31, 1949, repealed the earlier Ordinance, the result is nonetheless that the change in the law in so far as the amendment of section 10(2)(vii) is concerned was effective from April 1, 1949. This contention advanced by the assessee also fails.
The result is the question is answered in the affirmative and against the assessee. The department will be entitled to its costs. Counsels fee Rs. 250.