Law:

Section:

JUDGMENT Mehar Singh, J.-This is a reference by the Income-tax Appellate Tribunal (Delhi Bench), on an order from this court under sub-section (2) of section 66 of the Indian Income-tax Act of 1922, of the following question : "Whether, in the facts and circumstances of the case, the Tribunal is correct in law in holding that the assessee firm (R.B. Jodha Mal Kuthalia, Abdullapur Depot, Simla) was not entitled to the benefit provided in section 25(3) or 25(4) of the Income-tax Act, in relation to the assessment in question?" The Hindu undivided family Hakam Mal Tani Mal were taxed under the Income-tax Act of 1918 on income from, among other sources, manufacture and sale of timber at Abdullapur. The Hindu undivided family, subsequently in the accounting year relevant to the assessment for 1934-35, converted itself into a partnership. It appears that that partnership was orally dissolved, its business was divided up, and the business of the timber depots at Abdullapur fell to the share of R.B. Jodha Mal and Gajjan Mal Ram Parkash, who then formed a new partnership about the same, each having half share in the business. So far as the present reference is concerned, the only evidence of the dissolution of the previous partnership and the creation of the new partnership between R.B. Jodha Mal and Gajjan Mal Ram Parkash in regard to the Abdullapur timber depots, is the deed of partnership entered into between the last named two on June 29, 1939. The material part of that deed, which has bearing on the question under consideration, reads : "Whereas, we, the deponents, were partners and shareholders in firm of Lala Hakam Mal Tani Mal, Simla, and all the partners of firm Lala Hakam Mal Tani Mal understood and settled their accounts up to the 31st of March, 1939, on the 31st of March, 1939, and all the partners have become separate from the 1st of April, 1939, and the business at Abdullapur in the name of firm Lala Hakam Mal Tani Mal and R.B. Jodha Mal Kuthalia has fallen to our share to run which we have by means of an oral agreement constituted a separate partnership styled R.B. Jodha Mal Kuthalia, Abdullapur, from the 1st of April, 1939. Now the said oral agreement is…

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