The total amount of the depreciation allowed in the past for both the buildings and machinery amounted to Rs.
4,25,050 as profits under the proviso s. 10 2 vii of the Act and Whether there were materials for the Tribunal estimating the sale value of the buildings at Rs.
Gopalakrishnan, for the intervener.
Venkataram and R. Gopalakrishnan, for the respondent.
5,36,034.
3,00.050 shown by the assessee as profit on the sale of plant and machinery.
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.
90,098.
74 of 1959.
Appeal by special leave from the judgment dated December 7, 1960, of the Madras High Court in T.C. No.
4,25,050 was liable to tax under the second proviso to S. 10 2 vii .
On the application filed by the assessee, the Tribunal referred to the High Court the following two questions Whether the assessee was properly assessed on Rs.
In the result, it held that a sum of Rs.
The respondent assessee.
The facts may briefly be stated.
The Income tax Officer held that the sale was the result of companylusion between the vendor and the vendee.
7,68,268 being the value of plant and machinery.
23,41,1 showed by the assessee.
It also rejected the companytention of the assessee that the said proviso was number applicable to its case.
On October 30, 1954, the companypany, 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 was companypletely closed down.
The books of the assessee company showed that the original companyt of the buildings was Rs.
10,00,000.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
3,00,050.
3,23,461.
The Ajax Products Ltd. now under liquidation was a public limited companypany incorporated in 1939 to carry on business in the manufacture and sale of steel and abrasives products.
The relevant assessment year is 1956 57 and the companyrespond ing accounting year is the calendar year 1955.
Against the order of the Appellate Assistant Commissioner, both the assessee and the Income tax Officer preferred appeal to the Income tax Tribunal.
K. Daphtary, Attorney General, S. C. Gupte, Solicitor General, K. N. Rajagopala Sastri, R. H. Dhebar and R. N. Sachthey, for the appellant.
3,46,034.
1,25,000 instead of Rs.
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.
In the case of the machinery the sale price exceeded the difference between the companyt and the written down value and that excess was Rs.
23,411 over the written down value of the buildings.
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.
The sale resulted in the excess realisation of Rs.
He came to the companyclusion that the assessee had realised the full original companyt of the buildings and machinery and on that basis, he treated the sum of Rs.
He rejected the companytention of the assesses that the second proviso to S. 10 2 vii was number applicable to his case.
The Tribunal estimated the value of the buildings at a sum of Rs.
Agreeing with the Appellate Assistant Commissioner, it accepted the figure of Rs.
The Divisional Bench of the High Court held that the estimate of the sale value of the buildings by the Tribunal was number based upon any material and therefore companyld number stand.
2,32,963 which gave a profit on sale of Rs.
1,08,321, that the companyt of the machinery was Rs.
1098 of 1963.
The said amount was made up of 1 Rs.
Hence the present appeal has been filed.
1,31,732 being the value of the buildings and 3 Rs.
1,00,000 being the value of the land, Rs.
that its written down value was 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.
74 of 1959.
3,90,148 and its written down value Rs.
