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Issues: (i) Whether the surplus of Rs. 29,364 realised on sale of machinery was taxable under Section 10(2A) or under the second proviso to Section 10(2)(vii) of the Indian I.T. Act, 1922; (ii) Whether there was evidence to support the finding that the machinery was not used for the assessee's business in the year of sale.
Issue (i): Whether the surplus of Rs. 29,364 realised on sale of machinery was taxable under Section 10(2A) or under the second proviso to Section 10(2)(vii) of the Indian I.T. Act, 1922.
Analysis: The claim under Section 10(2A) failed because the amount realised on sale of machinery could not be treated as a loss, expenditure, or trading liability incurred by reason of depreciation allowed in earlier years. The surplus on sale of discarded machinery was not brought within that provision merely because depreciation had been claimed and allowed previously. As to the second proviso to Section 10(2)(vii), its application depended on the machinery having been used in the relevant year of sale.
Conclusion: The amount was not taxable under Section 10(2A), and it was also not taxable under the second proviso to Section 10(2)(vii).
Issue (ii): Whether there was evidence to support the finding that the machinery was not used for the assessee's business in the year of sale.
Analysis: The record contained material showing that the machinery had been discarded in the previous year, including the assessee's statement and the letter addressed to the Income-tax Officer. Those materials were part of the record before the appellate authorities and were sufficient to support the factual finding that the machinery was not used in the year 1959. The finding was therefore one of fact based on evidence on record.
Conclusion: There was evidence to support the finding that the machinery was not used in the year of sale.
Final Conclusion: The surplus arising from sale of the machinery was not taxable under either provision invoked by the revenue, and the factual finding regarding non-use of the machinery in the year of sale was sustained.
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