Cost basis on business succession follows predecessor's original cost where facts and statutory language match earlier controlling authority.

Facts materially indistinguishable from the Scottish authority, and the Indian statutory language was held to be of the same scope and effect, so the earlier construction applied directly. On that basis, the Court rejected the Revenue's attempt to treat the succession consistently for some purposes and differently for others, and held that the relevant cost basis for computation was the original cost to the predecessor concern, not the takeover value. The reference was answered wholly in favour of the assessee, with costs awarded against the Revenue.

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Issues: (i) Whether the case was distinguishable on facts from the Scottish decision relied upon; (ii) whether there was any material difference between the Indian statutory language and the corresponding English provision; (iii) whether the calculation had to be made on the original cost to the earlier business or on the value at which assets were taken over by the assessee.

Issue (i): Whether the case was distinguishable on facts from the Scottish decision relied upon.

Analysis: The facts were treated as substantially the same, and no factual distinction was found between the relationship of the assessee to the predecessor concern and the relationship considered in the Scottish authority.

Conclusion: The issue was answered in the negative against the Revenue and in favour of the assessee.

Issue (ii): Whether there was any material difference between the Indian statutory language and the corresponding English provision.

Analysis: The statutory language was held to be materially the same in scope and effect, so the reasoning of the Scottish decision was taken as directly applicable.

Conclusion: The issue was answered in the negative against the Revenue and in favour of the assessee.

Issue (iii): Whether the calculation had to be made on the original cost to the earlier business or on the value at which assets were taken over by the assessee.

Analysis: The Court rejected the Revenue's attempt to treat the assessee as identical with the predecessor for one revenue purpose and as distinct for another, and held that the relevant figure was the original cost to the predecessor concern.

Conclusion: The calculation had to be made on the original cost to the Madras Engineering Works and not on the takeover value; this was decided in favour of the assessee.

Final Conclusion: The reference was answered wholly in favour of the assessee, with costs awarded against the Revenue.

Ratio Decidendi: Where the facts and statutory language are materially indistinguishable from an earlier controlling decision, the same construction must be applied, and the relevant cost basis cannot be altered by treating the same succession differently for different revenue purposes.

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