Statutory auction sales and transfer dates under income tax law turn on consent and sale certificate finality.

An auction sale of assets conducted to recover cane cess arrears as arrears of land revenue was treated as a "sale" within section 10(2)(vii) of the Indian Income-tax Act, 1922, because statutory recovery through auction did not exclude the element of consent where the assessee had entered the legal framework knowing default could lead to such sale. For section 12B, the relevant transfer was taken to occur only on issuance of the sale certificate, since the special revenue procedure made confirmation, possession, and the certificate operative for transfer, and displaced section 65 of the Code of Civil Procedure to the extent of inconsistency.

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Issues: (i) Whether an auction sale of assets conducted for recovery of cane cess arrears as arrears of land revenue is a "sale" within section 10(2)(vii) of the Indian Income-tax Act, 1922. (ii) Whether the sale must be treated as having taken place on the auction date or only on the date of the sale certificate for the purpose of section 12B of the Indian Income-tax Act, 1922.

Issue (i): Whether an auction sale of assets conducted for recovery of cane cess arrears as arrears of land revenue is a "sale" within section 10(2)(vii) of the Indian Income-tax Act, 1922.

Analysis: The statutory levy arose from an activity voluntarily carried on by the assessee, and the recovery machinery under the relevant revenue law exposed the assessee to sale of its properties upon default. The Court held that the absence of a freely negotiated transfer did not exclude the element of consent altogether, because the assessee had entered the statutory framework with knowledge that default could result in auction sale of its assets. On that basis, the transaction fell within the statutory expression "sold" in section 10(2)(vii).

Conclusion: The transaction was a sale for the purposes of section 10(2)(vii), and the contention of the assessee failed.

Issue (ii): Whether the sale must be treated as having taken place on the auction date or only on the date of the sale certificate for the purpose of section 12B of the Indian Income-tax Act, 1922.

Analysis: Under the U.P. Zamindari Abolition and Land Reforms Act and the Rules made thereunder, the sale became effective only upon confirmation, delivery of possession, and issuance of the certificate contemplated by Rule 285M, which expressly deemed the certificate to be a valid transfer of the property. The Court also held that section 65 of the Code of Civil Procedure, 1908 did not govern the matter because the special revenue procedure displaced it to the extent of inconsistency. Accordingly, the relevant transfer date was the date of the sale certificate.

Conclusion: The sale took place on the date of the sale certificate, so section 12B was attracted.

Final Conclusion: The assessee's challenge to taxability on both grounds failed, and the Revenue's view on the applicability of the business profits provision and capital gains provision was sustained.

Ratio Decidendi: A sale carried out through statutory recovery proceedings may still fall within a taxing provision using the expression "sold", and where the governing special statute makes the sale certificate the operative transfer, the transfer is complete only on issuance of that certificate.

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