Partition of a Hindu undivided family business can amount to discontinuance when the original business ends in law.

Partition of a Hindu undivided family's money-lending business was held to amount to discontinuance where the division brought a complete cessation of the old business as a single unit. A mere continuance by the father with allotted assets, the same books, premises, goodwill, or customers did not preserve the legal identity of the original business. The business assessed as one unit came to an end in law, and the post-partition activity was treated as a new and distinct business. On that basis, Section 25(3) relief applied and the question was answered against the Revenue.

---

---

Issues: Whether the partition of a Hindu undivided family's money-lending business resulted in a discontinuance of the business so as to attract Section 25(3) of the Indian Income-tax Act.

Analysis: The relevant test was whether there was a complete cessation of the business, not a mere change of ownership. The partition divided a single joint family business into separate parts, breaking its unity and legal integrity. The fact that the father continued the business with the allotted assets, using the same books, premises, goodwill, or customers, did not preserve the identity of the old business. On partition, the business which had been assessed as one unit came to an end in law and the continuing activities of the father were treated as a new and distinct business.

Conclusion: The partition amounted to discontinuance of the business, and the assessee was entitled to the benefit of Section 25(3); the question was answered in the negative against the Revenue.

---