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PETITIONER: COMMISSIONER OF INCOME-TAX, MADRAS

       Vs.

RESPONDENT: AJAX PRODUCTS LTD.  THROUGH ITS LIQUIDATOR

DATE OF JUDGMENT: 08/10/1964

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. SIKRI, S.M.

CITATION:  1965 AIR 1358            1965 SCR  (1) 700  CITATOR INFO :  RF         1966 SC 870  (8)  RF         1967 SC 193  (18)  R          1968 SC 623  (29)  RF         1969 SC 812  (9)  RF         1969 SC 869  (6)  R          1971 SC  57  (7)  R          1973 SC1016  (13)  RF         1975 SC  67  (7)  F          1976 SC 313  (27)

ACT: Indian Income Tax Act, 1922, s. 10(2) (vii), 2nd proviso and section  66-No business activity in year of sale of  assets- Excess of sale-price over written down values whether can be treated  as profits under proviso-Appellate Tribunal  making its own estimate of sale-value of buildings-No material  for finding--Jurisdiction   of  High  Court  to   interfere   in Reference.

HEADNOTE: The  respondent company went into voluntary  liquidation  in October  1954.   The company had the calendar  year  as  its accounting year and the business of the company was  finally closed  before  the  end of the  calendar  year  1954.   The liquidator  sold the company’s assets  including  buildings, plant and the machinery in March 1955 at a price higher than the  written  down value. The Income-tax Officer  taxed  the surplus  in the assessment year 1956-57invoking the  proviso to s. 10(2)(vii) of the Indian Income-tax Act.  His order in this   respect  was  upheld  by  the   Appellate   Assistant Commissioners  well as by the Appellate  Tribunal.   However the High ,Court held that since there was no business in the accounting  year  1955, the proviso was not  attracted.   It further  held  that the estimate of the sale  value  of  the buildings  made  by the Tribunal could not stand as  it  was based  only  on surmises.  The  Commissioner  of  Income-tax appealed to the Supreme Court. HELD  :  (i)  The High Court  rightly  interfered  with  the Tribunal’s  estimate  of  the sale-value  of  the  buildings because  the  Tribunal’s  finding  was  not  based  on   any material. [704 D]

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(ii)The  legal  fiction in the second proviso  to  s.  10(2) (vii) is a limited fiction for a specific purpose.  What are not regarded as profits in commercial practice are under the proviso  treated  as  profits of the  previous  year.   This fiction  adequately serves the purpose of the section.   The fiction  must not be stretched beyond the purpose for  which it was enacted. [710 F-G] Additional Income Tax Officer, Circle I Salem v. E.  Alfred, [1962]  Supp.   1  S.C.R. 143 and  C.I.T.  Bombay  City   v. Amarchand N. Shroff [1963] Supp.  1 S.C.R. 699, referred to. (iii)If  the words of a statute are precise and  unambiguous they must be taken as declaring the express intention of the legislature.   By  giving  the  natural  meaning  to   every expression  used  in the proviso in  question,  the  proviso serves the purpose intended by the legislature.  To  sustain the argument of the Revenue many words have to be read in it which are not there. [706 F; 710 G] Cape  Brandy Syndicate v. I.R.L. [1921] 1 K.B. 64,  referred to. (iv)The expression ’previous year’ does not have a different meaning  in  the  proviso  from  what  it  bears  under  the definition in s. 2 (11) (b). [711 C-D] Dandhania  Kedia & Co. v. C.I.T. [1959] Supp.  1 S.C.R.  204 and  Commissioner  of  Income-tax v. K.  Srinivasan  and  K. Gopalan, [1953] S.C.R. 486, referred to. (v)  Even if a proviso is construed as a substantive  clause it  must be construed harmoniously with the main  enactment. [709 B-C] 701 Commissioner  of Income-tax, Mysore,  Travancore-Cochin  and Coorg  v.  Indo Mercantile Bank Ltd. [1959] Supp.  2  S.C.R. 256, referred to. (vi)Before the amendment of 1949 the proviso in question was interpreted  by this Court as laying down  three  conditions for  its  applicability, namely, that business  should  have been carried on by the assessee for the whole or at least  a part  of the previous year, that the machinery  etc.  should have been used in the business and that the machinery should have  been sold while the business was being carried on  and not  for  the purpose of closing it down or winding  it  up. The  amendment  removed  only the  last  condition  for  the eligibility of the tax. [706 B; 711 F-G] The Liquidators of Pursa Ltd. v. Commissioner of Income-tax, Bihar  [1954]  S.C.R. 767 and  Commissioner  of  Income-tax, Madras  v.  Express Newspapers Ltd. [1964]  53  I.T.R.  250, relied on. The  expressed  intention  of the legislature  is  that  the surplus  mentioned  in the proviso is not  exigible  to  tax unless the assessee did business during the accounting  year and  unless  such buildings or machinery were used  for  the purpose  of the business in the said year or at any  rate  a part of the year, though they were sold after the  cessation of  the  business.   If the argument  of  the  Revenue  were accepted there would be no time limit for the assessment  of the surplus. [708 A-B; 711 E] In  the present case the sale took place in  the  accounting year 1955 during no part of which business was carried on by the  assessee.  The proviso was therefore not applicable  to the surplus realised on sale.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1098  of

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1963. Appeal by special leave from the judgment dated December  7, 1960, of the Madras High Court in T.C. No. 74 of 1959. C.   K. Daphtary, Attorney-General, S. C. Gupte,  Solicitor- General,  K.  N. Rajagopala Sastri, R. H. Dhebar and  R.  N. Sachthey, for the appellant. R.   Venkataram and R. Gopalakrishnan, for the respondent. R.   Gopalakrishnan, for the intervener. The Judgment of the Court was delivered by Subba  Rao  J.  This appeal by  special  leave  is  directed against  the  judgment of the High Court  of  Judicature  at Madras in Tax Case No. 74 of 1959. The  facts may briefly be stated.  The  respondent-assessee. The  Ajax Products Ltd.-now under liquidation was  a  public limited company incorporated in 1939 to carry on business in the  manufacture and sale of steel and  abrasives  products. On  October  30,  1954, the  company,  at  an  extraordinary general body meeting, made a resolution to go into voluntary liquidation  and  the  Liquidator  appointed  by  the   said resolution  carried  on  the business  till  the  middle  of December 1954 when the business 702 was  completely closed down.  On March 10, 1955, the  Liqui- dator executed a sale deed to Garborundum Universal  Limited transferring   to  the  latter  the  plant,  machinery   and buildings  for a sum of Rs. 10,00,000.  The said amount  was made  up of : (1) Rs. 1,00,000 being the value of the  land, (2)  Rs. 1,31,732 being the value of the buildings  and  (3) Rs.  7,68,268 being the value of plant and  machinery.   The books of the assessee-company showed that the original  cost of  the  buildings was Rs. 3,46,034. that its  written  down value was Rs. 1,08,321, that the cost of the machinery   was Rs. 3,90,148 and its written down value Rs.  90,098.     The total amount of the depreciation allowed in the   past   for both the buildings and machinery amounted   to Rs. 5,36,034. The  sale resulted in the excess realisation  of Rs.  23,411 over the written down value of the buildings. In the   case of  the  machinery the sale price  exceeded  the  difference between the cost and the written down value and that  excess was Rs. 3,00,050. The relevant assessment year is 1956-57 and the  correspond- ing accounting year is the calendar year 1955.  The  Income- tax  Officer held that the sale was the result of  collusion between  the  vendor  and  the  vendee.   He  came  to   the conclusion that the assessee had realised the full  original cost  of the buildings and machinery and on that  basis,  he treated  the  sum  of  Rs. 5,36,034  which  was  allowed  as depreciation  in respect of buildings and machinery  in  the previous  years as profits within the meaning of the  second proviso to S. 10(2)(vii) of the Indian Income-tax Act, 1922. On  appeal, the Appellate Assistant Commissioner  held  that the  valuation  fixed  in  the sale  deed  executed  by  the assessee in favour of Carborandum Universal Limited was gen- uine and on that basis, determined the profits liable to tax at a sum of Rs. 3,23,461.  He rejected the contention of the assesses  that the second proviso to S. 10(2) (vii) was  not applicable to his case.  Against the order of the  Appellate Assistant Commissioner, both the assessee and the Income-tax Officer  preferred appeal& to the Income-tax Tribunal.   The Tribunal  estimated the value of the buildings at a  sum  of Rs.  2,32,963  which gave a profit on sale of  Rs.  1,25,000 instead  of  Rs. 23,41,1 showed by the  assessee.   Agreeing with  the Appellate Assistant Commissioner, it accepted  the figure  of Rs. 3,00.050 shown by the assessee as  profit  on the  sale  of plant and machinery.  In the result,  it  held

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that  a  sum  of Rs. 4,25,050 was liable to  tax  under  the second  proviso  to S. 10 (2) (vii).  It also  rejected  the contention  of  the assessee that the said proviso  was  not applicable to its 703 case.   On  the  application  filed  by  the  assessee,  the Tribunal  referred  to  the High  Court  the  following  two questions :               (1)   Whether   the  assessee   was   properly               assessed on Rs. 4,25,050 as profits under  the               proviso s. 10(2) (vii)    of the Act; and               (2)   Whether  there  were materials  for  the               Tribunal  estimating  the sale  value  of  the               buildings at Rs. 2,32,963. The  Divisional  Bench  of  the High  Court  held  that  the estimate of the sale value of the buildings by the  Tribunal was  not  based upon any material and  therefore  could  not stand.   On that finding, it substituted the figure  of  Rs. 3,23,461 for the figure of Rs. 4,25,050 in question (1).  It further  held that as the said machinery and buildings  were not  used  for the purpose of the business of  the  assessee during  any  part of the accounting year, the  said  profits were not liable to tax under the second proviso to s.  10(2) (vii)  of  the  Act.  In the result,  it  answered  the  two questions  in  favour of the assessee.   Hence  the  present appeal has been filed. Mr. Rajagopala Sastri learned counsel for the Revenue raised before  us  two  points;  (1) that/the  High  Court  had  no jurisdiction to set aside the finding of fact arrived at  by the  Tribunal to the effect that the profit on sale  of  the buildings was Rs. 1,25,000; and (2) that the second  proviso to  S.  10(2)(vii)  after its amendment by Act  67  of  1949 brings to charge the said deemed profits irrespective of the fact  whether the buildings and the machinery were used  for the business in the Previous year or not. To appreciate the first contention, it would be necessary to notice  the  reasons  given by the  Appellate  Tribunal  for differing  from  the  findings of  the  Appellate  Assistant Commissioner  and coming to the conclusion which it  did  in respect  of the sale price of the buildings.  The  Appellate Assistant   Commissioner  accepted  the  valuation  of   the buildings  given  by the Chartered Engineer.   The  Tribunal rejected  that estimate on the following grounds’:  (1)  the valuation  certificate of the buildings and  machinery  must have been obtained by the vendee company in connection  with its flotation for the purpose of its prospectus or statement in  lieu  of  Prospectus; (2) some of  the  buildings  found useless  for the vendee’s purpose had been left out  in  the valuation.   After  rejecting the certificate  on  the  said grounds  it  assumed  that the building  cost  had  gone  up steadily  since 1939 and on that basis it surmised that  the value of the buildings in 1955 would be Rs. 2,32,963. 704 it would at once be noticed that both the reasons given  and the  conclusion  arrived at by the Tribunal  were  based  on surmises.   There is nothing on the record to disclose  that the valuation certificate was issued in connection with  the flotation  of  the  company; nor is there  any  material  to suggest  that any particular building was omitted  from  the estimate and that those omitted had any marketable value  at all  What  is more, the estimate of the value given  by  the Tribunal  was a pure guess unrelated to the material  placed before  it.   The  High Court in dealing  with  this  matter observed :               "There was however no basis for the finding of

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             the  Tribunal, that the assessee  should  have               made  a profit of Rs. 1,25,000 by the sale  of               the  buildings.   The position  was  that  the               Tribunal did not reject the genuineness of the               valuation  made by the experts and it  had  no               material either for the estimates it purported               to make, the estimate either of the sale value               or of the profits realised by the sale of  the               buildings."               As  the finding of the Tribunal was not  based               upon   any  evidence,  the  High   court   was               certainly  entitled to go behind that  finding               and answer the question referred to it in  the               negative.               The  second  question raised before  us  turns               upon the relevant provisions of the Income-tax               Act.  The relevant provisions read:               "10(1) The tax shall be payable by an assessee               under   the  head  ’Profits  and  gains   of,,               business,  profession or vocation’ in  respect               of  the  profit  or  gains  of  any   business               profession or vocation carried on by him.  (2)               Such profits or gains shall be computed  after               making the following allowances.               (vii)in   respect   of  any   such   building,               machinery  or  plant which has  been  sold  or               discarded  or  demolished  or  destroyed,  the               amount by which the written down value thereof               exceeds  the  amount for which  the  building,               machinery  or  plant, as the case may  be,  is               actually sold or its scrap value:               Provided               Provided  further  that where the  amount  for               which any such building, machinery or plant is               sold,  (whether during the continuance of  the               business  or  after  the  cessation  thereof,)               exceeds the written down value, so-much of the               excess  as  does  not  exceed  the  difference               between the original cost and the written down               value shall be               705               deemed  to be profits of the previous year  in               which the Sale took place It  may  be noticed that in the second  proviso,  the  words "whether during the continuance of the business or after the cessation  thereof" were introduced by Act 67 of 1949.   The argument  of  Mr.  Rajagopala Sastri may  be  summarised  as follows  :  File  second  proviso to S.  10(2)  (vii)  is  a substantive charging section though couched in the form of a proviso  and under the said proviso as amended,  whenever  a sale  takes place after the cessation of the  business,  the surplus  must  be  deemed  to be the  profits  of  the  year previous  to the year in which the sale took place; and  for the purpose of the proviso, the business must also be deemed to  have  been  conducted by the assessee  during  the  said previous year.  By fiction, the argument proceeded that  all the  necessary  conditions  to the exigibility  of  tax  are introduced  though in fact none exists.  For  the  assessee, Mr. Venkatram contended that the amendment only released one of the conditions of taxability, namely, that the sale shall not have been held after the cessation of the business. The respondent in Special Leave Petitions (Civil) Nos.  916- 918  of 1964 have filed an application for  intervention  in this  appeal on the ground that the High Court  has  decided his  case following the judgment under appeal.   We  allowed

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him  to  intervene.   Mr. Gopalakrishnan  appeared  for  the intervener and supported the arguments advanced on behalf of the respondent in this appeal. Before we advert to the arguments of the learned counsel for ,the Revenue, it would be convenient to notice the scope  of the decisions of this Court dealing with the construction of the said proviso before its amendment.  The leading case  on this  subject  is  The  Liquidators  of  Pursa  Limited   v. Commissioner  of Income-tax, Bihar(1).  There, the  question was  whether the surplus made by the company on the sale  of plant and machinery could be brought into charge as  profits under  the  second  proviso to s. 10 (2) (vii)  of  the  Act before  the said amendment.  This Court held that  the  said surplus  was not taxable as the plant or machinery  was  not used in the accounting year and also for the reason that the said  assets were sold in the process of gradual winding  up of  the company, i.e., after the cessation of the  business. The  same question again fell to be considered in  a  recent decision of this Court in Commissioner of Income-tax, Madras v.  Express Newspapers, Ltd.  This Court  after  considering the earlier (1) [1954] S.C.R. 767.        (2) (1964) 53 I.T.R. 250 706 decisions laid down at p. 255 the following three conditions for the applicability of the second proviso :               "(1) During the entire previous year or a part               of it the business shall have been carried  on               by the assessee;               (2) the machinery shall have been used in  the               business; and               (3)   the machinery shall have been sold  when               the business was being carried on and not  for               the  purpose of closing it down or winding  it               up;" It  is therefore clear that if the amendment was not  there, the  present  case  is  directly covered  by  the  said  two decisions  as the plant and machinery were not  used  during the  accounting year and were sold only after the  cessation of the business. Would  the amendment make any difference in the  application of  the  proviso?   The rule of  construction  of  a  taxing statute has been pithily stated by Rowlatt J. in Cape Brandy Syndicate v. I.R.C.(1) thus:               "In  a  Taxing Act one has to look  merely  at               what  is clearly said.  There is no  room  for               any  intendment.  There is no equity  about  a               tax.   There is ’no presumption as to  a  tax.               Nothing  is  to be read in, nothing is  to  be               implied.   One  can only look  fairly  at  the               language used." To  put  it in other words, the subject is not to  be  taxed unless   the   charging  provision   clearly   imposes   the obligation.   Equally important the rule of construction  is that if the words of a statute are precise and  unambiguous, they must be accepted as declaring the express intentions of the  legislature.   Giving a close scrutiny  to  the  second proviso, it will be clear that by giving the natural meaning to  every word used therein, it clearly fits in  within  the scheme  of the entire section.  The key expressions  in  the proviso  are  : (1) such building, (2)  whether  during  the continuance  of the business or after the cessation  thereof and  (3)  ’deemed to be the profits of the  previous  year’. The  words  ’such  building’  have  already  been  given  an authoritative interpretation by this Court in the  aforesaid two decisions.  In the latter decision (Express  Newspaper’s

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case) at p. 254, it is observed thus :               "The  adjective "such" refers back to  clauses               (iv), (V) (vi) and (vii) of S. 10 (2).   Under               clause (iv) an allowance is allowed in  regard               to  any premium paid in respect  of  insurance               against risk of damage or destruc- (1)  [1921] 1 K.B. 64 at p. 71. 707 tion  of  buildings,  machinery, plant, etc.  used  for  the purpose of the business, profession or vocation.  Under this clause allowance is allowed only in respect of the machinery used for the purpose of the business.  Clauses (v), (vi) and (vii)  refer to such buildings, machinery, plant, etc.  used for  the  purpose of the business.  The result is  that  the second proviso will only apply to the sale of such machinery which  used  for  the purpose of  the  business  during  the accounting year." The  words "whether during the continuance of  the  business after  the  cessation  thereof"  were  not  present  in  the unamendproviso.  In the two decisions cited earlier, in  the absence  of words, this Court held that to attract the  said proviso the chinery shall have been sold before the business was  closed  .  This clause omits  that  condition  for  the exigibility of tax. The  third expression ’shall be deemed to be profits of  the previous  year’  in  its  ordinary  connotation,  carries  a natural meaning with it.  Though the surplus contemplated by the  proviso  is  not in the technical  sense  of  the  term profits  of  the  previous, year ,it is  deemed  to  be  the profits of the previous year.  It is a limited fiction for a specific  purpose.   What  are  not  profits  in  commercial practice  are  treated  as profits for the  purpose  of  the provisio.   This  fiction was in existence even  before  the amendment  .The  two decisions of this Court  cited  earlier laid  down  the  scope  of  the  fiction.   In  the  Express Newspaper’s  case(’), it was held that having regard  to  s. 10(l) of the Act, the main condition which attracts all  the other sub-sections and clauses of the section is at the  tax shall  be  payable by an assessee in respect  of  profit  or gains  of the business carried on by him.  If  the  business was carried on by him during the accounting year, this court held  that  the said surplus, if the other  conditions  laid down by the provisio were complied with, would be deemed  to be  the profits of the previous year.  One of the  important expressions  in the provisio is ’previous  year’.  (Previous Year is defined in s. 2 (I I) (b) to mean in the case of any person, business or company or class of person . business or company,  such  period as may be determined by  the  Central Board  of  Revenue  or by such authority as  the  Board  may authorise  in  this  behalf.)  In  the  present  case,  the. previous year is the calender preceding the assessment  year deemed  profit must therefore relate to the  calender   year proceding the assessment year .By giving the natural meaning to every (1)  (1964) 53 I.T.R 250. 708 expression  used in the proviso, we reach the result  namely that  the  surplus  mentioned in the  said  proviso  is  not exigible to tax unless the assessee did business during  the accounting  year  preceding the assessment year  and  unless such  buildings or machinery yielding surplus were used  for the  business  in the said year or at any rate part  of  the year, though they were sold after the lion of the  business. To illustrate, an assessee did business during some part  of the  accounting year 1955 but closed it in October  of  that

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year.   He used the machinery during some part of  the  year for  the  business.   He sold it  in  December.   The  price realised  yielded  a  surplus  within  the  meaning  of  the proviso.   During  the  assessment year  1956-57,  the  said surplus  could  be brought into charge  notwithstanding  the fact that the machinery was sold after the cessation of  the business.  Before the amendment, the said surplus could  not be taxed as the sale was subsequent to the cessation of  the business.  By giving the natural meaning to every expression in  the proviso, the proviso serves the purpose intended  by the legislature. Now,  let us consider the argument advanced by  the  learned counsel for the Revenue.  In support of the contention  that after  the  amendment the proviso conferred a power  on  the taxing ,authorities to tax the said surplus even though  the assessee  did  not  in  fact  conduct  business  during  the previous year and though in fact the machinery was not  used in  the  said  business  during  a  part  of  whole  of  the accounting  year, it is said that the proviso is a  charging section, that though it is couched in the form of a proviso, it is really a substantive section imposing a charge on  the as in respect of the said surplus. The function of a proviso has been considered by this  court in  ’Commissioner of Income-tax.  Mysore,  Travancore-Cochin and  Coorg  v. Indo-Mercantile Bank Ltd.’(1)  It  is  neatly summarised in the Head Note thus :               "The  proper function of a proviso is that  it               qualifies the generality of the main enactment               by providing an exception and taking out as it               were, from the main enactment a portion which,               but  for  the proviso, would fall  within  the               main enactment.  Ordinarily, it is foreign  to               the proper function of a proviso to read it as               providing  something by way of an addendum  or               dealing with a subject which is foreign to the               main enactment.  ’It is a fundamental rule  of               construction that a proviso               (1)   (1959)  36  I.T.R.  1:  [1959]  Supp.  2               S.C.R. 256.               709               must  be  considered  with  relation  to   the               principal  matter  to  which it  stands  as  a               proviso.’  Therefore,  it is to  be  construed               harmoniously with the main enactment." There may be cases in which the language of the statute  may be so clear that a proviso may be construed as a substantive clause.   But whether a proviso is construed as  restricting the main provision or as a substantive clause, it cannot  be divorced from the provision to which it stands as a Proviso. It  must be construed harmoniously with the main  enactment. So construed, we have already stated earlier the result that flows from such a construction. The second contention is that the fiction introduced in  the proviso  is wide in its scope and if fully worked  out,  all the conditions laid down in the proviso would be  satisfied. If  by invoking the fiction, the argument  proceeded,  there must  be  deemed  to have been a business  during  the  year preceding  to the assessment year, by the same fiction,  the buildings must be deemed to have been used in that  business during  that year.  For enlarging the scope of the  fiction, reliance  is  placed  upon the decision  of  this  Court  in ’Additional Income- Officer, Circle 1, Salem and another  v. E. Alfred.(1) There, the legal representative of an assessee was  assessed  to tax after notice under S. 24-B(2)  of  the Act.   As  he  made a default in the  payment  of  the  tax,

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penalties were imposed upon him under S. 46 (1) of the  Act. Under S. 24-B, the Income-tax Officer may proceed to  assess the  total  income of the deceased person as if  such  legal representative  was the assessee.  It was argued that  after the  assessment  was made on the legal  representative,  the fiction  came to an end and thereafter, he remained  a  mere debtor to the department, and therefore, S. 46(1) could  not be applied to him.  Dealing with that argument, Hidayatullah J. speaking for the Court said : .lm15 "  When a thing is deemed to be something else, it is to  be treated  as  if  it is that thing, though, in  fact,  it  is not  .... It is in this sense that the legal  representative becomes an assessee by the fiction, and it is this  fiction, which has to be fully worked out, without allowing the  mind ’to boggle’. . . . " The  above decision is of no help to the appellant.   There, the  statute  treated him as an assessee and as  he  made  a default  as  an assessee, he became liable for  the  penalty under  S.  46(1).   The statutory  fiction  was  given  full effect. (1)  [1962] Supp. 1 S.C.R. 143. 710 This  Court in Commissioner of Income-tax Bombay City 1,  v. Amarchand  N. Shroff(1) rightly administered a caution  that fictions  should  not be stretched beyond  the  purpose  for which  they were enacted.  In that case, the question  arose whether  under  S. 24-B of the Act  the  Income-tax  Officer could  levy tax on receipts by the legal  representative  of the  deceased person in the years of  assessment  succeeding the  year of account being the previous year in  which  such person  died.   Under s. 24-B the legal personality  of  the deceased  assessee  was  extended for the  duration  of  the entire  previous  year in the course of which  he  died  and therefore  the income received by him before his  death  and that  received by his heirs and legal representatives  after his death but in that previous year became assessable in the relevant  assessment year.  The Court held that the  section was enacted to bring to tax after the death, income received during  his life time.  In that context, Kapur  J.  speaking for the Court observed thus :               "By  section  24-B the  legal  representatives               have,  by fiction of law, become assessees  as               provided  in  that section  but  that  fiction               cannot be extended beyond the object for which               it was enacted.  As was observed by this court               in Bengal Immunity Co. Ltd. v. State of Bihar,               legal fictions are only for a definite purpose               and they are limited to the purpose for  which               they  are created and should not  be  extended               beyond that legitimate field.  In the  present               case  the  fiction  is limited  to  the  cases               provided -in the three sub-sections of s. 24-B               and  cannot  be  extended  further  than   the               liability  for  the  income  received  in  the               previous year." The  fiction  in the second proviso is a limited  one.   The surplus  is deemed to be the profits of the  previous  year. As  we  have pointed out earlier, it adequately  serves  the purpose  of  the section.  It was given  a  limited  meaning under the earlier decisions.  To sustain the argument of the Revenue,  it  has to be enlarged in its scope.   Many  words have  to  be read into it which are not  there.   We  cannot accept this argument. It  is  said  that  the  words  ’previous  year’  need   not

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necessarily  be an accounting year wedded to the  assessment year and it can be given a different meaning if the  context demands  it.   This  Court  in Dhandhania  Kedia  &  Co.  v. C.I.T.(2) approved of the (1) [1963] Supp.  1 S.C.R. 699. (2) [1959] Supp.  1 S.C.R. 204, 711 observations of Mahajan J. in Commissioner of Income-tax  v. K.Srinivasan and K. Gapalan. (1) The observations of Mahajan are to the following effect :               "..  .  .  . . For purposes  of  the  charging               sections of the Act unless otherwise  provided               for  it is co-related to a year of  assessment               immediately  following  it,  but  it  is   not               necessarily  wedded to an assessment  year  in               all  cases  and  it cannot be  said  that  the               expression  ‘  previous year’ has  no  meaning               unless  it is used in relation to a  financial               year.  In a certain context, it may well  mean               a   completed  accounting   year   immediately               preceding the happening of a contingency." Be  that as it may, in the present case, in the context,  as we  have already indicated, there is no reason to  give  the expression  a  meaning different from that bears  under  the definition. If  the  argument  advanced on behalf of  the  Revenue  were accepted  it would lead to some anomalies.  By the  fiction, if the business must be deemed to be in existence during the previous year and that the buildings sold must be deemed  to have  been  used  for the business  during  that  year,  the amendment was not necessary.  If it existed there could  not have  been a cessation of it during the previous  year.   On that reasoning judgment in Pursa’s case would have been  the other  way.  If the argument was correct, there would be  no time  limit for the assessment of the surplus.   Whenever  a building  was  sold,  whatever might be  the  time  lag,  by fiction,  the business, as well as the user of the  building in that business would be in the -previous year by the  year of assessment.  We cannot accept a contention yielding  such a  result  unless it is so clearly expressed.   Indeed,  the expressed intention of the legislature is the other way.  We therefore  hold that the amendment only removed one  of  the conditions  for the exigibility of the said surplus  to  tax namely the cessation of the business and in other  respects, the  construction  put  upon  the  proviso  by  the  earlier decisions of this Court is still good law.  In our view, the answers given by. the High Court to the questions propounded are correct. In the result, the appeal fails and is dismissed with costs. Appeal dismissed. (1) [1953] S.C.R. 486. 712