On an analysis of this table, it is clear that there were numberfresh acquisitions after July 7, 1941, till 1950.
Between 1942 and 1945 the territory of Malaya was under occupation by the Japanese forces and it appears that during that period some houses belonging to the companypany were destroyed by fire.
After 1945 some more lands admeasuring approximately 700 acres in the aggregate were sold by the Company.
On further appeal, the Income tax Appellate Tribunal companyfirmed the order of the Appellate Assistant Commissioner observing that all the material facts were number brought to the numberice of the Tribunal at the hearing of the appeals in respect of the earlier years.
On December 4, 1937, a private limited companypany was registered in the name of P.K.N. Company Ltd. hereinafter called the companypany under the Pudukottai Company Regulation V of 1929 with its head office at Viswanathapuram, in the territories of His Highness the Maharaja of Pudukottai.
Thereafter, pursuant to a direction of the High Court of Madras under section 66 2 of the Income tax Act, 1922, the Tribunal referred the following question for the opinion of the High Court Whether, on the facts and circumstances of the case, the surplus of 1,41,326 realised by the assessee company by the sale of some of its estates and properties held by it in Malaya was income chargeable to tax under the Indian Income tax Act ?
With special leave, the companymissioner of Income tax has appealed to this companyrt.
Thereafter in 1948, 1949 and 1950 lands were sold from time to time and profits were made.
But the Income tax Appellate Tribunal set aside the orders.
In companysideration of the transfer of these properties, the companypany allotted shares of the face value of 6,60,000 Malayan dollars to the partners of the firm of P. K. N. and the balance remained outstanding as a debt due by the Company to the firm of P.K.N. On March 14, 1941 the Company purchased a rubber estate called the Lee Estate for 2,62,655 Malayan dollars.
On July 7, 1941 the Company purchased for 5,000 Malayan dollars a house in companyownership with another firm.
The following table which has been incorporated in Paragraph 8 of the case submitted by the Tribunal givers in the form of a tabulated statement the acquisitions and disposal from time to time Year Purchase Sale Profit Loss of account of properties of properties 1 2 3 4 5 Year ended 31 3 39 1,577,560 31 3 40 67,213 7,917 3,366 31 3 41 262,655 10,188 3,259 31 4 42 5,000 51,821 15,041 31 3 43 4,400 4,000 30,600 31 3 44 3,331 1,881 31 3 45 500 267,610 232,751 31 3 48 17,500 7,500 31 12 48 188,145 37,220 31 12 49 120,734 43,333 31 12 50 1,000 326,462 140,899 Total 1,918,328 998,078 485,250 32,454 These represent transfers only.
30,600 Malayan dollars entered in the last companyumn in the year ending March 31, 1943, it is companymon ground, represents loss by fire and does number represent loss as a result of a sale transaction.
On august 1, 1949, the state of Pudukottai integrated with the Province of Madras, and after the extension of the Indian Income tax Act to that territory, the companypany was assessed by the Income tax Officer, Pudukottai, as a dealer in real estate and profits amounting to 34,272 Malayan dollars and 40,613 Malayan dollars were brought to tax in the assessment years 1949 50 and 1950 51.
In the companyrse of its business the P.K.N. firm acquired rubber estates and other immovables in the Districts of Muar and Segamat in the Federated States of Malaya.
Between the years 1942 to 1945, the territory of Malaya was under Japanese occupation and during that period also some plots of land were sold.
The Appellate Assistant Commissioner companyfirmed the order in appeal.
The total area of 3,000 acres originally transferred by the P.K.N. firm on the formation of the companypany was apparently number a companypact block and the companypany was unable to administer the far flung estates in different places effectively and economically, and on that account certain small plots of land were sold in 1940 and 1941.
Between March 23, 1939, and July 8, 1939, an area of more than 3,000 acres of rubber plantations, several houses and open plots of land, which were the assets of the P.K.N. firm, were transferred to the companypany for an aggregate companysideration of 16,50,000 Malayan dollars.
The first lot was purchased between March 23, 1939, and July 8, 1939, from the P.K.N. firm for 1,650,000 Malayan dollars, and the other which was the Lee Estate, was purchased on March 14, 1941.
In the year 1941 and 1942 some of the properties acquired from the firm of P. K. N. were sold by the Company.
Shah, J. A partnership styled P.K.N. was carrying on money lending business in several towns in India and also in the Federated States of Malaya.
The Tribunal observed that the activities of the companypany outside India were limited to the holding of properties, and deriving income therefrom, and that the properties did number companye to the companypany in the companyrse of its money lending business, number companyld it be said that they were acquired for the purpose of resale at a profit, and that the companypany was formed in order to take over these properties and it would be far from companyrect to say that the properties taken over were intended to be turned into stock in trade, and therefore profits realised by sale of the properties were of capital nature.
Before the order of the Tribunal was pronounced, the Income tax Officer assessed the companypany for the assessment year 1951 52 on a total profit of 1,41,326 Malayan dollars earned from the sale of immovable properties.
