The assessee is a partnership firm which was carrying on the business of manufacturing artsilk cloth.
The assessee as well as the Revenue filed appeals against the said decision of the Appellate Asstt.
The liabilities were shown at Rs.
The said companytention was rejected by the Tribunal on the basis of the decision of this Court in Pandit Lakshmikant Jha v. Commissioner of Income Tax.,
The Tribunal framed the following questions for companysideration whether the surplus is taxable at all?
In Associated Clothiers Ltd. supra the appellant companypany, which was originally registered as Phelps Co. Ltd., altered its name to Associated Clothiers Ltd. on March 21, 1952.
In pursuance of the said agreement, the assessee ceased to carry on the business with effect from April 1, 1966 and the said business stood trans ferred to the companypany.
15,87,296.
1997 Supp 1 SCR 608 The Judgment of the Court was delivered by C. AGGRAWAL, J. This appeal by certificate granted by the Gujarat High Court under Section 261 of Income Tax Act, 1961 hereinafter referred to as the 1961 Act involves the question whether the surplus as a result of difference between the written down value and the sale companysideration for the Plant, machinery and dead stock transferred by the assessee is under Section 41 2 of 1961 Act.
In this companytext, reference may also be made to the decisions of this Court in Associated Clothiers Ltd. v. Commissioner of Income Tax, Calcutta, 1967 63 ITR 224, and Pandit Lakshmikanta Jha v. Commissioner of Income Tax, Bihar Orissa, 1970 75 ITR 790.
100 each according to original shares of partners of the assessee.
On March 31, 1966 the assessee and the companypany entered into an agreement whereunder the assessee agreed to sell to the companypany the business hitherto carried on by the assessee as a whole going companycern.
11,50,400.
On January 9, 1970, a revised return was filed showing nil income with a numbere that since the partnership firm was companyverted into a private limited companypany as a going companycern there was numberincome chargeable to tax either under Section 41 2 or under Section 45 of the 1961 Act.
41,73,973, out of which the machinery and dead stock, as revalued by M s. Hargovandas Girdharlal, was Rs.
Question Nos.
12,56,020.
Commissioner, on appeal, has held that the surplus was assessable under the head Capital Gains and number under the head Business.
15,87,296.
Feeling aggrieved by the said decision of the High Court, the Revenue has filed this appeal on the basis of the certificate of fitness granted by the High Court.
2, 3, 4 and 5 has been answered in favour of the assessee and against the Revenue.
The new companypany took possession of the property agreed to be sold on July 1, 1952.
Under the terms of the agreement the appellant company purported to transfer seven items of property described in the schedules annexed to the deed.
A private Ltd. Company by the name of Artex Manufacturing Company Private Ltd. hereinafter referred to as the companypany was formed with a a view to take over the business of the assessee as a running.
15,87,296 for which Plant, machinery and dead stock were transferred to the companypany, the Income Tax Officer held that tax was payable under Section 41 2 on the income of Rs.
Phelps Co. Ltd., in companysideration of the allotment of shares and some cash, the latter taking over the liabilities of the appellant company.
30,23,573 and the balance amount of Rs.
11,50,400 was shown as the purchase companysideration.
1 in favour of the Revenue and against the assessee.
No deed of companyveyance was executed.
The companysideration for the said sale was Rs.
4,36,896, the written down value of Plant, machinery and dead stock as per assessees books, came to Rs.
During the companyrse of the assessment proceed ings before the Income Tax Officer, for the purpose of determination of purchase companysideration, the assets were shown at Rs.
In respect of the assessment year 1967 68, the assessee filed its return showing nil income.
The Written Down Value of Plant, machinery and dead stock as per assessees books, was Rs.
2 to 6 which were answered against the revenue.
4,36,896.
Relying upon the decision of this Court in Commissioner of Income Tax, Gujarat II v. B.M. Kharwar, 1969 72 ITR 603, the Income Tax Officer held that tax was payable under Section 41 2 on the surplus amount, i.e., difference between the written down value of Plant, machinery and dead stock as per assesss books and the value of the same as revalued by M s. Hargovandas Girdharlal.
The Appellate Asstt.
1970 75 ITR 790.
The Income Tax officer held that the written down value of Plant, machinery and dead stock as per Income Tax records was Rs.
The difference between Rs.
11,50,400 which was paid and satisfied by allotment of 11,504 fully paid up equity shares of Rs.
15,87,296, the value of Plant, machinery and dead stock as revalued, and Rs.
On the same day another companypany was incorporated in the name of Phelps and Co. Ltd. and by a written agreement of the same date the appellant companypany agreed to transfer its assets and liabilities to the new companypany, viz.,
As regards the status of the assessee it was held that the assessee must be taxed in the status of Association of Persons and number in the status of a Registered Firm.
Commissioner before the Income Tax Appellate Tribunal hereinafter referred to as the Tribunal .
The appeal relates to the assessment year 1967 68.
