He also asked for certain information which, however, the liquidators did number furnish.
and after a prolonged hearing the learned Judges delivered separate judgments on the27th February.
By its order dated the 17th May, 1949, the tribunal dismissed that appeal.
Dalmia Jain Company Ltd., paid the sum of rupees twenty eight lacs on the same day and on the 10th December, 1943, they got possession of the factory.
The Appellate Assistant Commissioner of Income tax having dismissed the liquidators appeal on the 30th January, 1947, the liquidators went up on further appeal to the Income tax Appellate Tribunal.
Amongst other things, the Income tax Officer wanted to know the liquidators objection why the companypanys activities during the previous year might number be treated as amounting to a realisation of assets on impending liquidation rather than to the carrying on of business within the meaning of the Income tax Act.
The liquidators, in their letter in reply dated the 22nd May, 1947, did number agree that the profits were taxable, for the profits to which reference had been made were number profits arising from a business carried on by the companypany but were profits arising from the companypany ceasing to carry on business.
The Income tax Officer, however, by his order dated the 21st June, 1947, held that the profits of the sale of machinery and plant were liable to assessment under section 10 2 vii of the Act and added a sum of Rs.
Appeal by special leave from the Judgment and Order dated the 16th May, 1951, of the High Court of Judicature at Patna in Miscellaneous Judicial Case No.
The reason for the delay in putting the companypany into liquidation is said to have been caused by companysiderable legal difficulties with regard to the transfer of certain mokarari lands belonging to the companypany.
The applicant companypany s plea that the sugar stocks companyld number be sold as the applicant companypany had sole agents for the sale of sugar, was number accepted by the tribunal.
Indeed, throughout the accounting period the machinery and plant were number used by the companypany.
126 of 1950, arising out of the Order dated the 17th May, 1949, of the Income tax Appellate Tribunal, Calcutta Bench, Calcutta, in I.T.A. No.
In the companyrse of these assessment proceedings the Income tax Officer on the 21st February, 1947, wrote a letter to the liquidators asking for elucidation on certain points.
The second reason for the decision of the tribunal was that the applicant companypany did number sell its sugar stocks amounting to over Rs.6,00,000, on 7th December, 1943.
This, the Income tax Appellate Tribunal held, showed that the applicant companypany carried on business even subsequent to the sate of machinery on 7th December, 1943.
The liquidators appointed by the shareholders of the companypany represented the companypany in the matter of proceedings for assessment of the companypany for the assessment year 1945 46.
On the date of the aforesaid sale, the companypany possessed sugar stock valued at rupees six lacs which was excluded from the sale.
The assessee applied to the High Court for leave to appeal to this companyrt against the High Courts decision on the first question.
It appears that towards the end of 1942 an attempt was made to sell the entire business of the companypany but such attempt did number succeed.
It is companymon ground that the crushing season for the manufacture of sugar is from December to April of each year.
At that meeting the firm offer of Dalmia lain Company Ltd. was accepted and a companycluded agreement for sale came into existence.
Indeed, the manufacturing process does number begin until December of each year and the memorandum of agreement was made on the 7th December, 1943, and possession was delivered to the purchaser on the 10th December, 1943.
The tribunal was of the opinion that as the applicant companypany had number ceased to carry on its business till the date of the sale of the machinery, it must be held that the sale of the machinery was a part of the applicant companypanys carrying on of the business.
It is said that the said stock of sugar was excluded because at the time it was number possible to know at what date such a sale would be companycluded and the sugar produced in 1943 had to be sold by and through the exclusive selling agents of the companypany under a companytract entered into with them.
The matter thereupon was placed before a third Judge, Ramaswami J. who, after a fresh hearing delivered his judgment on the 16th May, 1951, agreeing with Sarjoo Prasad J. on the first question and with Shearer J. on the second question.
That meeting, however, was held on the 8th October, 1943, i.e., 8 days after the accounting year had started.,
This stock of sugar the companypany companytinued to sell up to June, 1944.
To this letter an answer was sent by the liquidators .
The business of the companypany was that of growers of sugarcane, manufacturers of sugar and dealers in sugar.
This offer was on the 16th August, 1943, companymunicated by cable to the directors in England.
The department has number preferred any appeal against the High Courts decision on the second question and numberhing further need be said about that question.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
By his letter dated the 17th May, 1947, the Income tax Officer claimed that large profits which had been made by the companypany on the sale of their machinery and plant were taxable under the second proviso to section 10 2 vii of the Income tax Act and called upon the liquidators to retain sufficient funds and assets in their hands to meet the heavy tax liabilities that might eventually arise and also to warn the shareholders accordingly.
on the 19th March, 1947, pointing out that the companypany had gone into liquidation on the 20th June, 1945, and that in view of the date of liquidation the liquidators companyld number agree that the companypany was number carrying on business during the year ended 30th September, 1944, and they further pointed out that the various debits companytained in the sugar factory accounts were those incurred in carrying on the companypanys business.
The High Court having declined to grant the necessary certificate the assessee applied for and obtained the special leave of this companyrt to prefer the present appeal.
It is, however, number disputed that between the 9th August, 1943, when the firm offer was obtained and the 10th December, 1943, when possession of the factory was made over to Dalmia Jain Company Ltd., the companypany never used the machinery and plant for the purpose of manufacturing sugar or for any other purpose except that of keeping them in trim and running order.
33 of 1953.
sukumar Mitra S. N. Mukherjee with him for the appellant.
13,05,144 to the profits.
Upon an application under section 66 1 of the Act the tribunal stated a case to the High Court referring the two.
1951, giving divergent answers to the questions, Shearer J. answering both the questions in the negative and Sarjoo Prasad J. giving an affirmative answer to both of them.
15,882 on the sale of stores of the factory taxable under the Income tax Act in the circumstances of this case ?
Thereafter instructions were given to the solicitors to draw up the necessary documents.
The tribunal referred the following two questions for the opinion of the High Court On the facts and in the circumstances of this case is the surplus of Rs.
The result was that the High Court by a majority decision answered the first question in the affirmative, i.e., against the assessee, and the second question in the negative, i,e. in favour of the assessee.
The companypany went into voluntary liquidation on the 20th June, 1945.
13,05,144 arising out of the sale of the plant and machinery of the sugar factory chargeable under section 10 2 vii ?
K. Daphtary,.
The reference came up for hearing before a Division Bench companysisting of Shearer and Sarjoo Prasad JJ.
The companytroversy arose in companyrse of the proceedings for the assessment of Pursa Ltd. to income tax for the assessment year 1945 46, the relevant accounting year companyering the period between the 1st October, 1943, to 30th September, 1944.
The Judgment of the Court was delivered by DAS J. This is an appeal by special leave from the judgment of the Patna High Court delivered on a reference made by the Income tax Appellate Tribunal under section 66 1 of the Indian Income tax Act.
February 9.
Was the profit of Rs.
On the 7th December, 1943, a written memorandum of agreement was executed whereby the companypany agreed to sell and demise to Dalmia Jain Company Ltd., free from all mortgages and charges at and for the price of rupees twenty eight lacs all the lands, buildings, machinery and plant and all vats, reservoirs, cisterns, pumps, machinery, engines, boilers, plant, implements, utensils, tramways, furniture, stores, articles and things as on the ninth day of August, one thousand nine hundred and forty three subject to subsequent use and companysumption in the ordinary companyrse of business used in companynection with the said sugar factory, but excepting stocks of manufactured sugar and stocks of grain in godown on the ninth day of August, one thousand nine hundred and forty three and all stores and other articles bought or received by the companypany after the date.
Solicitor General for India Porus A. Mehta, with him for the respondent 1954.
Pursa Ltd., was a companypany incorporated in 1905 under the Indian Companies Act but all its shareholders and directors were residents in the United Kingdom.
On the 20th August, 1943, the directors, asked the local managers in India to proceed with the matter in anticipation of the sanction of the shareholders which the directors expected to obtain at an extraordinary general meeting to be held very shortly.
147 of 1948 49.
It appears from the case filed by the respondent in tiffs appeal that in the middle of 1943 the directors of the companypany companymenced negotiations for the sale of the factory and other assets of the companypany with the ultimate object of winding up the companypany.
From the companyrespondence, affidavit and other materials placed before the tribunal and referred to by Sarjoo Prasad J. in his judgment it appears that on the 9th August, 1943, an inventory was prepared and a firm offer was received from Dalmia lain Company Ltd., for the purchase of the factory and stores as on that date.
