Business discontinuance under section 25(3) turns on the enterprise itself, not mere partnership reconstitution.

Relief under section 25(3) depends on whether the business itself was discontinued, not merely on a dissolution or reconstitution of the partnership. A prior statement referring to dissolution of the old firm and formation of a new one did not estop the assessee, because it also recognised continuation of the business by the remaining partners. On the facts, the solicitors' business was carried on under the same name with continuity of assets and working arrangements, so the relevant discontinuance occurred only in 1948. The assessee was therefore entitled to relief under section 25(3).

---

---

Issues: (i) Whether the assessee was estopped from claiming that the business was discontinued only in 1948 because of the statement made in the 1933 appeal; (ii) Whether the business of the firm had been discontinued in 1931 or had continued until 31 March 1948 so as to attract relief under section 25(3).

Issue (i): Whether the assessee was estopped from claiming that the business was discontinued only in 1948 because of the statement made in the 1933 appeal.

Analysis: The earlier statement acknowledged dissolution of the old firm and the formation of a new firm, but it also stated that the business was continued by the remaining partners. The statement did not amount to an admission that the business itself had ceased. The distinction between dissolution of the partnership and discontinuance of the business was material, and the assessee's earlier stand was not inconsistent with the present claim.

Conclusion: The assessee was not estopped from contending that there had been no discontinuance of business in 1931.

Issue (ii): Whether the business of the firm had been discontinued in 1931 or had continued until 31 March 1948 so as to attract relief under section 25(3).

Analysis: The partnership deeds showed that the object of the reconstitution was to carry on the same solicitors' business under the same name, with the movable assets and working capital arrangements directed to continuation of the business. Section 25(3) applies when the business is discontinued, not merely when the ownership or constitution of the firm changes. On the facts, the business was reconstituted and continued, and the later dissolution in 1948 was the relevant discontinuance.

Conclusion: The business was not discontinued in 1931 and the assessee was entitled to relief under section 25(3) on the discontinuance in 1948.

Final Conclusion: The reference was answered in favour of the assessee, the Tribunal's view was upheld, and the claimed tax relief was available on the basis that the business continued until 31 March 1948.

Ratio Decidendi: For relief under section 25(3), the relevant question is whether the business itself was discontinued, not whether the partnership constituting its ownership was dissolved or reconstituted; a mere change in partners does not by itself amount to discontinuance of the business.

---