Construction of sale agreement and opening stock valuation upheld, with the stock addition sustained against the assessee.

On a true construction of the 2 August 1956 agreement, the total consideration covered not only the scheduled assets but also goodwill and allied rights. The reference in clause 4 to book value as on 1 August 1956 was read as the closing book value on 31 July 1956, so the schedule value of stock could not control the contractual scheme. The higher opening stock figure entered by the assessee did not reflect the true stock value under the agreement, and the addition of Rs. 33,000 was therefore justified against the assessee.

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Issues: Whether, on a true construction of the agreement dated 2 August 1956, the sum of Rs. 33,000 could be treated as part of the assessee-company's assessable profits on account of an inflated valuation of opening stock.

Analysis: The agreement had to be read as a whole. It showed that the total consideration of Rs. 2,60,000 covered not merely the assets listed in the schedule, but also other properties transferred, including goodwill and allied rights. The reference in clause 4 to book value as on 1 August 1956 was understood as the closing book value on 31 July 1956. The schedule value of stock could not override the contractual scheme, and the higher figure entered by the assessee-company for opening stock did not represent the true stock value under the agreement.

Conclusion: The addition of Rs. 33,000 was justified, and the question was answered in the affirmative against the assessee.

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