Commissioner of Income Tax, Madras vs Ajax Products Ltd.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 1098 of 1963

Decision Date: 08/10/1964

Coram: J.C. Shah, S.M. Sikri, Subba Rao

In this case the Commissioner of Income‑Tax for Madras instituted proceedings against Ajax Products Limited, which was represented by its liquidator. The matter was reported in the Supreme Court of India on 8 October 1964. The bench comprised Justice J.C. Shah, Justice S.M. Sikri and Justice K. Subbarao. The decision is reported in the 1965 volume of the All India Reporter at page 1358 and in the 1965 Supplement to the Supreme Court Reports at page 700, with several subsequent citations in later reports. The statutory provisions under consideration were section 10(2)(vii) of the Indian Income‑Tax Act, 1922, together with its second proviso, and section 66 of the same Act. The factual background was that Ajax Products Limited had entered voluntary liquidation in October 1954. The company’s accounting year followed the calendar year, and its business operations had been terminated before the close of the calendar year 1954. The liquidator subsequently disposed of the company’s assets, including buildings, plant and machinery, in March 1955. The assets were sold for an amount that exceeded their written‑down values. The assessing officer, applying the proviso to section 10(2)(vii), taxed the surplus on the assessment year 1956‑57. This assessment was affirmed by the Appellate Assistant Commissioners as well as by the Appellate Tribunal. However, the High Court set aside the assessment on two grounds: first, that because no business was carried on in the accounting year 1955 the proviso could not be invoked; and second, that the Tribunal’s determination of the sale value of the buildings was unsupported because it was based solely on conjecture. The Commissioner of Income‑Tax appealed this High Court decision to the Supreme Court.

The Supreme Court held that the High Court was correct in rejecting the Tribunal’s estimate of the buildings’ sale value, observing that the Tribunal’s finding was not based on any material evidence. The Court explained that the second proviso to section 10(2)(vii) creates a limited legal fiction that treats amounts which are not regarded as profits in ordinary commercial practice as profits of the preceding year, solely for the purpose intended by the legislature; this fiction must not be expanded beyond its intended scope. The Court further held that when the language of a statute is clear and unambiguous, it must be taken as expressing the legislature’s exact intention, and the natural meaning of each expression in the proviso should be applied to fulfil the legislative purpose. The Court warned that sustaining the Revenue’s argument would require reading words into the provision that are not present. It also clarified that the term “previous year” in the proviso carries the same meaning as defined in section 2(11)(b) of the Act. The Court added that even if a proviso is read as a substantive clause, it must be interpreted harmoniously with the main enactment. Finally, the Court noted that before the 1949 amendment, the proviso had been interpreted by this Court as imposing three conditions for its applicability, namely that the assessee must have carried on business for the whole or at least a part of the relevant year. The judgment therefore affirmed the High Court’s interference with the Tribunal’s estimate and affirmed the application of the proviso only in situations that satisfy its specific, limited purpose.

The Court observed that the provision in the proviso accomplished the purpose that the legislature had intended. In order to uphold the Revenue’s position, however, the Court noted that one would have to read into the provision words that are not actually present, a view that the Court rejected while referring to Cape Brandy Syndicate v. I.R.L., 1921 1 K.B. 64. The Court further explained that the term “previous year” in the proviso carries the same meaning as defined in section 2(11)(b) of the Act, a point supported by the authorities 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. Moreover, the Court held that even when a proviso is read as a substantive clause, it must be interpreted in harmony with the main enactment, citing the decision of Commissioner of Income‑tax, Mysore, Travancore‑Cochin and Coorg v. Indo Mercantile Bank Ltd., 1959 Supp. 2 S.C.R. 256. Turning to the historical development of the proviso, the Court explained that prior to the 1949 amendment the Court had construed the proviso as imposing three conditions for its operation: (i) the assessee must have carried on business for the whole or at least part of the previous year; (ii) the machinery or plant must have been used in the business; and (iii) the machinery must have been sold while the business was still being carried on, not for the purpose of winding up. The amendment, the Court noted, eliminated only the third condition concerning the motive for sale, as reflected in the cases of 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. The Court emphasized that the legislature’s expressed intention was that the surplus described in the proviso would not be taxable unless the assessee was engaged in business during the relevant accounting year and the assets in question had been used for that business during that year, or at least a part of it, even if the assets were sold after the business ceased. Accepting the Revenue’s argument, the Court warned, would remove any temporal limitation on assessing the surplus. In the case before it, the sale of the plant, machinery and buildings occurred in the accounting year 1955, a year during which the assessee conducted no business at all; consequently, the Court concluded that the proviso did not apply to the surplus realized from that sale. The judgment was rendered in the civil appellate jurisdiction, specifically Civil Appeal No. 1098 of 1963, which was filed by special leave against the Madras High Court’s decision dated 7 December 1960 in Tax Case No. 74 of 1959. Counsel for the appellant, comprising the Attorney‑General, the Solicitor‑General and other representatives, appeared for the petitioner, while counsel for the respondent and counsel for the intervener represented the opposite parties. The opinion of the Court was delivered by Justice Subba Rao.

The respondent‑assessee, Ajax Products Ltd., which was then under liquidation, had been incorporated in 1939 as a public limited company engaged in manufacturing and selling steel and abrasive products. By resolution passed at an extraordinary general meeting on 30 October 1954, the company decided to enter voluntary liquidation; consequently a liquidator was appointed who continued the business until mid‑December 1954, at which point the operations were entirely ceased. On 10 March 1955 the liquidator executed a sale deed transferring the plant, machinery and buildings to Garborundum Universal Limited for a total consideration of ten lakh rupees. The consideration comprised one lakh rupees for the land, one lakh thirty‑one thousand seven hundred and thirty‑two rupees for the buildings and seven lakh sixty‑eight thousand two hundred and sixty‑eight rupees for the plant and machinery.

The company’s books recorded that the original cost of the buildings was three lakh forty‑six thousand thirty‑four rupees, with a written‑down value of one lakh eight thousand three hundred and twenty‑one rupees. The machinery had originally cost three lakh ninety‑thousand one hundred and forty‑eight rupees and its written‑down value stood at ninety thousand ninety‑eight rupees. Depreciation claimed in earlier years for the buildings and machinery amounted in total to five lakh thirty‑six thousand thirty‑four rupees. The sale therefore yielded a surplus of twenty‑three thousand four hundred and eleven rupees over the written‑down value of the buildings, while for the machinery the sale price exceeded the difference between cost and written‑down value by three lakh rupees and fifty rupees.

The assessment year in question was 1956‑57, corresponding to the calendar year 1955 as the accounting year. The Income‑Tax Officer concluded that the sale had been effected through collusion between the seller and the purchaser, and that the assessee had realised the full original cost of both the buildings and the machinery. Relying on that conclusion, the officer treated the five lakh thirty‑six thousand thirty‑four rupees previously allowed as depreciation as profits under the second proviso to section ten, sub‑section two, clause (vii) of the Indian Income‑Tax Act, 1922. On appeal, the Appellate Assistant Commissioner accepted the valuation fixed in the sale deed as genuine and consequently assessed tax on a profit of three lakh twenty‑three thousand four hundred and sixty‑one rupees, rejecting the assessee’s argument that the second proviso was inapplicable.

Both the assessee and the Income‑Tax Officer appealed the Assistant Commissioner’s order to the Income‑Tax Tribunal. The Tribunal re‑estimated the value of the buildings at two lakh thirty‑two thousand nine hundred and sixty‑three rupees, thereby calculating a profit on the sale of the buildings of one lakh twenty‑five thousand rupees instead of the twenty‑three thousand four hundred and eleven rupees shown by the assessee. Agreeing with the Assistant Commissioner, the Tribunal accepted the assessee’s figure of three lakh rupees and fifty rupees as profit on the sale of the plant and machinery. As a result, the Tribunal held that a sum of four lakh twenty‑five thousand fifty rupees was liable to tax under the second proviso of section ten, sub‑section two, clause (vii).

In this case, the Tribunal had held that the amount of Rs. 4,25,050 was assessable as profit under the second proviso to Section 10(2)(vii) of the Act, and it had also dismissed the assessee’s argument that the proviso did not apply to his situation. The assessee then filed an application before the Tribunal, asking it to refer two specific questions to the High Court. The first question sought a determination of whether the assessment of Rs. 4,25,050 as profit under the said proviso was proper, and the second question asked whether any material existed to support the Tribunal’s estimate of the building’s sale value at Rs. 2,32,963. The Divisional Bench of the High Court examined the material and concluded that the Tribunal’s estimate of the building’s sale price was unsupported by any evidence and therefore could not be sustained. Consequently, the Court substituted the figure of Rs. 3,23,461 in place of the previously assessed Rs. 4,25,050 for the purpose of the first question. The Court further observed that the machinery and buildings in question had not been employed in the assessee’s business at any time during the relevant accounting year, and therefore the profits arising from their sale were not subject to tax under the second proviso to Section 10(2)(vii). As a result, the High Court answered both referred questions in favour of the assessee. Following this decision, the Revenue filed the present appeal before this Court.

The Revenue, represented by learned counsel, raised two principal objections before this Court. First, it contended that the High Court lacked jurisdiction to overturn the Tribunal’s factual finding that the profit on the sale of the buildings amounted to Rs. 1,25,000. Second, it argued that the amendment made by Act 67 of 1949 to the second proviso of Section 10(2)(vii) rendered the deemed profit chargeable irrespective of whether the buildings and machinery had been used in the business during the preceding year. To address the first objection, it is necessary to review the Tribunal’s reasons for departing from the findings of the Appellate Assistant Commissioner concerning the building’s sale price. The Appellate Assistant Commissioner had accepted the valuation prepared by a Chartered Engineer, but the Tribunal rejected that valuation on two grounds. Firstly, the Tribunal held that the valuation certificate must have been obtained by the purchasing company in connection with its flotation and intended for inclusion in a prospectus or a statement in lieu of a prospectus. Secondly, the Tribunal asserted that certain buildings deemed useless for the purchaser’s purpose had been omitted from the valuation. After rejecting the certificate on these bases, the Tribunal inferred that the cost of the buildings had risen steadily since 1939, and on that basis it estimated the 1955 value of the buildings to be Rs. 2,32,963. It is evident that both the reasons advanced by the Tribunal and the conclusion it reached were based on conjecture rather than on concrete evidence. Moreover, the record contains no indication that the valuation certificate was issued in the context of a flotation, nor is there any evidence that any specific building was excluded from the valuation and possessed any marketable value. Consequently, the Tribunal’s estimate was a pure speculation unrelated to the material before it.

The Court observed that the record contained no evidence showing that the valuation certificate had been prepared in connection with any flotation of the company, and there was no material indicating that a particular building had been omitted from the valuation or that any omitted building possessed any marketable value. In addition, the Court held that the value estimate produced by the Tribunal was nothing more than a speculative guess and was not linked to any of the documentary material that had been placed before the Tribunal. The High Court, while examining the same issue, expressly stated that there was no foundation for the Tribunal’s finding that the assessee should have earned a profit of Rs 1,25,000 from the sale of the buildings. The High Court further noted that although the Tribunal did not question the genuineness of the experts’ valuation, it possessed no documentary or other material to support the figures it advanced, whether those figures related to the alleged sale price or to the profit that might have been realised on such a sale. Because the Tribunal’s conclusion was not based on any admissible evidence, the High Court was properly entitled to set aside that conclusion and to answer the reference question in the negative.

The second question presented before the Supreme Court concerned the application of specific provisions of the Income‑Tax Act. The relevant statutory language was reproduced as follows: “Section 10(1) provides that tax shall be payable by an assessee under the head ‘Profits and gains of business, profession or vocation’ with respect to any profit or gain arising from any such activity. Section 10(2) prescribes the allowances to be made in computing such profit or gain, and clause (vii) deals with any building, machinery or plant that has been sold, discarded, demolished or destroyed. It states that the amount by which the written‑down value of the asset exceeds the amount actually realized on its sale, or its scrap value, shall be taken into account, subject to a further provision. The further provision declares 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, then that portion of the excess which does not exceed the difference between the original cost and the written‑down value shall be deemed to be profit of the previous year in which the sale occurred.” The Court pointed out that the words “whether during the continuance of the business or after the cessation thereof” in this second proviso were inserted by Act 67 of 1949. Counsel for the respondent, Mr Rajagopala Sastri, summarized his argument that the second proviso to Section 10(2)(vii) is a substantive charging provision, even though it is expressed in the form of a proviso. He contended that, as amended, whenever a sale takes place after the business has ceased, the surplus must be treated as profit of the year preceding the year in which the sale occurs, and that for the purpose of applying the proviso the business must be deemed to have been conducted by the assessee during that preceding year. By a fictional construction, his argument proceeded that all the …

In this appeal the Court observed that the amendment introduced conditions that, in reality, did not exist to make tax payable. The assessee, Venkatram, argued that the amendment merely removed one of the conditions of taxability, specifically the requirement that a sale could not occur after the business had ceased. The respondent in Special Leave Petitions (Civil) Nos. 916‑918 of 1964 filed an application to intervene on the ground that the High Court had decided his case on the basis of the judgment that was now under appeal. The Court permitted the intervention. Counsel for the intervener then appeared and supported the arguments that had been advanced on behalf of the respondent in this appeal. Before turning to the submissions of the learned counsel for the Revenue, the Court found it useful to outline the scope of earlier decisions of this Court that dealt with the construction of the second proviso before it was amended. The leading authority on the matter is The Liquidators of Pursa Limited v. Commissioner of Income‑tax, Bihar (1). In that case the issue was whether the surplus realised by the company on the sale of plant and machinery could be treated as taxable profit under the second proviso to section 10(2)(vii) of the Act prior to the amendment. This Court held that the surplus was not taxable because the plant or machinery had not been used during the accounting year and, additionally, because the assets were sold in the course of a gradual winding‑up of the company, that is, after the business had ceased. The same question arose again in the more recent decision of this Court, Commissioner of Income‑tax, Madras v. Express Newspapers Ltd. After reviewing the earlier judgments, the Court set out three conditions that must be satisfied for the second proviso to apply: (1) during the whole of the preceding year or any part of it the business must have been carried on by the assessee; (2) the machinery must have been used in the business; and (3) the machinery must have been sold while the business was still being carried on and not for the purpose of closing down or winding up. Accordingly, the Court noted that if the amendment were absent, the present case would fall squarely within those two earlier decisions, because the plant and machinery had not been used in the relevant accounting year and were sold only after the cessation of the business. The Court then posed the question whether the amendment altered the operation of the proviso. It quoted the rule of construction of a taxing statute articulated by Rowlatt J. in Cape Brandy Syndicate v. I.R.C. (1), stating that in a taxing act one must look only at what is explicitly said; there is no room for any intention, no equity in tax, no presumption that tax is due, and nothing may be read into or implied from the provision. The Court emphasized that the language of the statute must be given its plain meaning.

The Court explained that the rule of construction of a taxing statute requires the interpreter to look solely at the language employed in the provision. In other words, a subject cannot be subjected to tax unless the charging provision expressly imposes the tax liability. The Court stressed that when the words of a statute are precise and unambiguous, they must be taken as the clear expression of the legislature’s intention. Turning to a careful examination of the second proviso, the Court found that giving each word its ordinary meaning makes the proviso fit naturally within the overall scheme of the section. The Court identified three key expressions in the proviso: (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 term “such building” had already received an authoritative interpretation from this Court in the two earlier decisions that were cited. In the later decision, commonly known as the Express Newspaper case, the Court observed at page 254 that the adjective “such” refers back to the clause dealing with buildings, machinery, plant and other assets used for the purpose of the business, profession or vocation. The Court explained that the allowance under that clause is available only with respect to machinery that was employed for the business purpose. It further noted that clauses (v), (vi) and (vii) also refer to such buildings, machinery, plant and the like that were used for the business. Consequently, the second proviso applies only to the sale of machinery that was actually used in the business during the accounting year. The Court pointed out that the words “whether during the continuance of the business or after the cessation thereof” were absent from the unamended proviso. In the two earlier decisions, the Court had held that, in the absence of those words, the proviso would be attracted only if the machinery was sold before the business was closed. By omitting that condition, the amended clause altered the requirement for tax exigibility. Regarding the third expression, “shall be deemed to be profits of the previous year”, the Court held that the phrase carries its ordinary meaning. Although the surplus contemplated by the proviso is not technically “profits of the previous year”, it is treated as such for the purpose of the provision. The Court described this treatment as a limited legal fiction created for a specific purpose, whereby amounts that are not profits in ordinary commercial practice are deemed to be profits for the purposes of the proviso. This fiction existed even before the amendment, and the earlier decisions of this Court had delineated its scope. In the Express Newspaper case, the Court, having regard to section 10(l) of the Act, observed that the principal condition that triggers all other sub‑sections and clauses of the section is that tax is payable by an assessee on the profit or gains of the business carried on by him. If the business was carried on by the assessee during the accounting year, the Court held that the surplus, provided the other conditions laid down in the proviso were satisfied, would be deemed to be the profits of the previous year.

The Court explained that the term “previous year” appears in the proviso and that it carries a specific definition under section 2(II)(b) of the Income‑Tax Act. According to that definition, “previous year” means, for any person, business or company, the period that may be fixed by the Central Board of Revenue or by any authority that the Board may authorize to act on its behalf. In the present matter, the Court identified the “previous year” as the calendar year that directly precedes the assessment year. Consequently, any profit deemed to arise under the proviso must relate to that calendar year which comes immediately before the assessment year. By interpreting every word in the proviso according to its ordinary meaning, the Court concluded that the surplus referred to in the proviso is not liable to tax unless two conditions are satisfied: first, the assessee must have carried on business during the accounting year that precedes the assessment year; and second, any buildings or machinery that generate the surplus must have been employed for the business during that year, or at least for a portion of it, even if the assets were sold after the business had ceased operations.

To illustrate this principle, the Court described a hypothetical situation in which an assessee carried on business for part of the accounting year 1955 and then closed the business in October of that year. The assessee used certain machinery during the period in which the business was active and subsequently sold that machinery in December. The amount realised on the sale created a surplus that falls within the meaning of the proviso. For the assessment year 1956‑57, the Court held that the surplus could be brought into charge, despite the fact that the machinery was sold after the business had terminated. The Court noted that, prior to the amendment of the statute, such a surplus could not have been taxed because the sale occurred after the cessation of the business. By consistently applying the natural meaning of each expression in the proviso, the Court observed that the provision achieves the purpose intended by the legislature.

The Court then turned to the argument presented by the counsel for the Revenue. The counsel contended that, after the amendment, the proviso conferred a power on the taxing authorities to levy tax on the surplus even where the assessee did not actually conduct business during the previous year and where the machinery was not used in the business for any part of the accounting year. The counsel characterised the proviso as a charging provision, asserting that although it is framed as a proviso, it effectively operates as a substantive section that imposes a charge on the assessee in respect of the surplus. In addressing this contention, the Court referred to its earlier decision in Commissioner of Income‑Tax, Mysore, Travancore‑Cochin and Coorg v. Indo‑Mercantile Bank Ltd. The Court recounted the headnote of that decision, which explained that the proper function of a proviso is to qualify the general scope of the principal enactment by providing an exception, thereby extracting from the main provision a portion that would otherwise be included within the main provision. The Court emphasized that a proviso is ordinarily foreign to the function of adding new substantive matters and must be read in harmony with the main enactment.

In this passage the Court explained that a proviso should not be read as an addendum that introduces a subject unrelated to the main enactment. The Court quoted the well‑settled principle that “It is a fundamental rule of construction that a proviso (1) (1959) 36 I.T.R. 1: [1959] Supp. 2 S.C.R. 256 must be considered with relation to the principal matter to which it stands as a proviso.” Consequently, the proviso must be interpreted in harmony with the principal provision. The Court observed that, on rare occasions, the language of a statute may be so clear that a proviso appears to operate as a substantive clause. Yet, whether the proviso is seen as limiting the main provision or as a substantive clause, it cannot be separated from the provision to which it is attached; it must always be read harmoniously with the main enactment. Having adopted that approach, the Court reiterated the conclusion it had already reached on the basis of such construction.

The second argument advanced was that the fictional device created by the proviso was expansive enough that, if fully applied, all the conditions stipulated in the proviso would be satisfied. The argument asserted that, by invoking the fiction, a business would be deemed to have existed in the year preceding the assessment year, and that, by the same fiction, the buildings would be deemed to have been used in that business during that year. To support an enlarged reading of the fiction, reliance was placed on the decision of this Court in Additional Income‑Officer, Circle 1, Salem and another v. E. Alfred (1). In that case, the legal representative of a deceased assessee was assessed under section 24‑B(2) of the Act. Because the representative defaulted in tax payment, penalties were imposed under section 46(1). Section 24‑B empowers the Income‑Tax Officer to assess the total income of the deceased as if the legal representative were the assessee. It was contended that once the assessment was made, the fictional construct ended, leaving the representative merely a debtor and therefore exempt from the penalty under section 46(1). Justice Hidayatullah, speaking for the Court, rejected that view, stating: “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 Court held that the decision in that case did not aid the appellant, because the statute there treated the representative as an assessee, and his default as an assessee made him liable for the penalty under section 46(1). The statutory fiction was therefore given its full effect. (1) [1962] Supp. 1 S.C.R. 143. This Court in Commissioner of Income‑Tax Bombay City v. Amarchand N. Shroff (1) subsequently warned that fictions should not be stretched beyond the purpose for which they were created.

In the matter of Amarchand N Shroff, the Court correctly cautioned that a legal fiction may not be stretched beyond the purpose for which it was originally enacted. The issue before the Court was whether, under section 24‑B of the Income‑Tax Act, the Income‑Tax Officer could levy tax on receipts that were received by the legal representative of a deceased person in assessment years that followed the year of account which was the previous year in which the deceased had died. Section 24‑B provides that the legal personality of a deceased assessee is deemed to continue for the whole of the previous year during which the death occurred. Consequently, any income that the deceased had received before death, together with any income that his heirs or legal representatives received after death but within that same previous year, became assessable in the assessment year that corresponded to that previous year. The Court held that the purpose of the provision was to bring to tax, after the death of the assessee, income that had been earned during his lifetime. In that regard, Kapur J, speaking for the Court, observed that “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 section 24‑B and cannot be extended further than the liability for the income received in the previous year.” The Court further explained that the fiction contained in the second proviso of the section is a narrowly limited one; the surplus is deemed to represent the profits of the previous year. As earlier pointed out, this limited construction adequately serves the purpose of the provision and earlier decisions had given the fiction a restricted meaning. To sustain the Revenue’s argument, however, the Court noted that the fiction would have to be enlarged beyond its intended scope, and that would require reading words into the provision that are not present. The Court therefore could not accept the Revenue’s contention. The Revenue had argued that the expression “previous year” need not necessarily correspond to an accounting year linked to the assessment year and could be given a different meaning if the context required it. The Court referred to the decision in Dhandhania Kedia & Co v CIT, where the observations of Mahajan J in Commissioner of Income‑Tax v K Srinivasan and K Gapalan were approved. Mahajan J’s observations were summarised as follows: “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.” The Court therefore concluded that, in the case before it, there was no justification for giving the expression a meaning different from that contained in the definition, and that accepting the Revenue’s wider construction would lead to anomalies inconsistent with the purpose of section 24‑B.

The Court observed that the expression “previous year” is ordinarily related to a financial year, but it added that in a particular circumstance the phrase may be understood to signify a completed accounting year that immediately precedes the occurrence of a contingency. Having made this observation, the Court turned to the facts of the present case and reiterated that, as previously indicated, there was no justification for assigning to the expression any meaning other than the one it bears under the statutory definition. The Court further held that accepting the argument put forward on behalf of the Revenue would give rise to various inconsistencies. By way of assumption, if the business were to be treated as having existed during the “previous year” and the buildings that were sold were to be treated as having been used for that business during the same year, then the legislative amendment under consideration would have been unnecessary. The Court explained that if the business were deemed to have existed, a cessation of the business could not have taken place during the “previous year.” On that basis, the judgment in the earlier Pursa’s case would have been reached in the opposite direction. Moreover, if the Revenue’s contention were correct, there would be no temporal limitation on assessing the surplus; each time a building was sold, regardless of the interval between the sale and the assessment, the business and the user of the building would, by fiction, be placed in the “previous year” for the purpose of the assessment year. The Court said it could not accept a proposition that produced such a result unless the legislature had expressed it with equal clarity. It observed that the clear intention of the legislature was the opposite. Accordingly, the Court held that the amendment merely eliminated one of the conditions required for the surplus to become taxable, namely the cessation of the business, while leaving the remainder of the construction imposed by the proviso in earlier decisions of this Court intact and still good law. In the Court’s view, the answers rendered by the High Court to the questions it had posed were correct. Consequently, the appeal was dismissed with costs, and the order of dismissal was affirmed.