Discontinuance under income tax law means cessation of business, not a change in legal character after family disruption.

"Discontinued" under the Indian Income-tax Act, 1922 was construed to mean cessation of the business itself, not a mere change in the legal capacity of the same persons carrying it on after Hindu undivided family disruption. On that construction, continuation of the business by the members as partners did not amount to discontinuance, and the income remained taxable under Section 25(3). The one-year limit in Section 25(5) was held to apply only to refund-based relief requiring action by the Income-tax Officer, such as reassessment and adjustment of tax already paid, and not to the statutory exemption that operated automatically. The reference was answered against the assessee.

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Issues: (i) Whether, on a disruption of a Hindu undivided family and continuation of the business by the members as partners, the case fell within the expression "discontinued" in Section 25(3) of the Indian Income-tax Act, 1922; (ii) whether the claim under Section 25(3) was barred by the one-year limit in Section 25(5).

Issue (i): Whether the business was "discontinued" within Section 25(3) when it continued in the hands of the same persons in a different legal capacity after the family disruption.

Analysis: The expression "discontinued" was construed in the setting of the Act as meaning cessation of the business, not a mere change in ownership or legal character of the persons carrying it on. The scheme of the Act distinguished discontinuance from succession, and the reference in Section 25(3) to succession showed that the provision was directed to cessation cases. The provision was aimed at preventing double taxation arising under the transition from the old assessment basis to the 1922 Act.

Conclusion: The business was not treated as discontinued in the relevant sense, and the income remained liable to tax under Section 25(3).

Issue (ii): Whether the application for relief was time-barred under Section 25(5).

Analysis: The time bar was held to apply only to the claim for the refund-based relief requiring action by the Income-tax Officer, namely, reassessment and adjustment of tax already paid. It did not govern the automatic exemption from tax on the income of the period between the end of the previous year and the date of discontinuance, because that exemption arose directly from the statute and required no discretionary relief to be granted by the Officer.

Conclusion: The limitation objection did not defeat the statutory claim in the manner contended, but it did not alter the result that the income was taxable under Section 25(3).

Final Conclusion: The reference was answered against the assessee, and the income in question was held taxable, with costs awarded to the Revenue.

Ratio Decidendi: For purposes of Section 25 of the Indian Income-tax Act, 1922, "discontinued" means cessation of the business and not a mere continuation of the same business by the same persons in a different legal capacity, and the time limit in Section 25(5) governs only claims requiring affirmative relief and reassessment, not the statutory exemption itself.

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