Discontinuance of business requires actual cessation, not mere change in ownership or partnership structure.

Discontinuance under section 25(3) of the Mysore Income-tax Act, 1923 requires actual cessation of the business, not a mere change in its ownership or constitution. Where a Hindu undivided family was partitioned and the same business was continued by a partnership formed by the former coparceners with an additional partner, the business was treated as continuing in substance. The transfer of business assets and liabilities to the firm, together with the partnership deed describing the firm as successor to the family business, showed continuity rather than cessation. No relief was available on the ground of discontinuance, and the revenue's position prevailed.

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Issues: Whether there was discontinuance of the business within the meaning of section 25(3) of the Mysore Income-tax Act, 1923, when a Hindu undivided family was partitioned and the same business was thereafter carried on by a partnership constituted by the former coparceners with one additional partner.

Analysis: The expression "discontinued" in section 25(3) was held to require a real and factual cessation of the business itself, not merely a change in the persons owning or carrying it on. The provision was intended to relieve assessees from hardship arising on the transition between taxing regimes, but it did not enlarge the concept of discontinuance to cover cases where the business continued in substance. On the facts, the partnership deed expressly stated that the new firm would carry on as successor to the business originally carried on by the Hindu undivided family, and the same business assets and liabilities were transferred to the firm. The partition of the family and the change from family ownership to partnership ownership did not amount to cessation of the business.

Conclusion: There was no discontinuance of business within section 25(3) of the Mysore Income-tax Act, 1923, and the assessee was not entitled to relief on that ground. The question was rightly answered in favour of the revenue.

Ratio Decidendi: For section 25(3), discontinuance means actual cessation of the business and not a mere change in ownership or in the constitution of the persons carrying it on.

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