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Issues: Whether the profits of Rs. 2,994 and Rs. 2,997 arising on sale of two trucks on January 1, 1946, are taxable under section 10(2)(vii) of the Income-tax Act.
Analysis: Section 10(2)(vii) applies to buildings, machinery or plant referred to in section 10(2)(iv) and related clauses, that are "used for the purposes of the business"; the scope of "used" includes passive as well as active user where the asset was available and maintained for business use for at least part of the accounting year. Precedents support a wide meaning of "used" so as to cover articles kept in running order and available for hire even when not actively employed throughout. Where an asset was in use up to the end of the previous accounting period and remained available and in running order at the commencement of the next previous year, subsequent sale during that previous year does not retrospectively negate that it was "used" in that previous year for the purposes of section 10(2)(vii). The proviso deems excess of sale proceeds over written down value to be profits of the previous year where such excess does not exceed the difference between original cost and written down value; the trucks' excesses fell within that deeming proviso. The facts showed the trucks were in running order and available for hire at the start of the previous year and were not shown to have been put out of use before sale.
Conclusion: Section 10(2)(vii) together with the second proviso applies; the profits of Rs. 2,994 and Rs. 2,997 on sale of the trucks are taxable under section 10(2)(vii) of the Income-tax Act.
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