1986 (5) TMI 27 - HC - Income Tax

Amalgamation surplus not business profit for taxation year; Court upholds earlier findings.

The High Court held that the surplus generated by a company engaged in real estate business, later amalgamated with another, was rightly not assessed as ... Business Profits Issues:1. Assessment of surplus as business profit2. Exemption of surplus as agricultural incomeAnalysis:The case involved a reference under the Income-tax Act regarding a company, later amalgamated with another, for the assessment year 1965-66. The company, engaged in real estate business, purchased land and sold it, resulting in a surplus of Rs. 31,653. Initially, the company declared this as business income but later appealed, claiming it was not a business transaction and could be exempt as agricultural income. The Appellate Assistant Commissioner and Tribunal rejected the claim, citing similarity with a previous Special Bench decision.The Tribunal referred two questions to the High Court: whether the surplus was rightly assessed as business profit and whether the claim of agricultural income exemption was valid. The High Court found in favor of the assessee, citing previous decisions where similar surpluses were exempted. The Department argued for a reconsideration based on different facts for the current year, but the High Court held that it was bound by the facts agreed upon during the Tribunal proceedings.The High Court emphasized that a reference in income-tax matters is based on questions of law and facts found or admitted before the Tribunal. As both parties had agreed on the similarity of facts with previous years during the Tribunal proceedings, the High Court could not entertain arguments for reconsideration based on different facts. The High Court concluded that the surplus was rightly not assessed as business profit for the assessment year 1965-66, based on the agreed facts and previous decisions, disposing of the reference with no costs awarded.