TaxTMI 
TaxTMI 
1964 (4) TMI 113
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.... of the said business. On January 21, 1948, the said business was sold as a going concern by the assessee firm to R.B. Lachmandas Mohan Lal and Sons Ltd., a private limited liability company incorporated on January 20, 1948. The memorandum and articles of association of the said company are annexed hereto as annexures "A" and "B", which form part of the case. They are, however, not printed in order to save cost and the assessee has undertaken to furnish copies to their Lordships at the time of the hearing. The Controller of Capital Issues issued a certificate to the said company, dated January 12, 1948, a copy whereof is annexed hereto as annexure "C" and forming part of the case. 3. The transfer to the said company by the assessee is evidenced by an agreement of sale dated January 20, 1948, and a sale deed dated January 21, 1948, which are annexed hereto as annexures "D" and "E" and forming part of the case. 4. According to the sale deed, the consideration for the land, buildings, machinery, plant and other assets was fixed at Rs. 30,00,000. Out of this, the cost of assets on which depreciation had been allowed to the assessee-firm was found to be Rs. 10,40,742. The written-....
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....axation Laws (Extension to Merged States and Amendment) Act, 1949, shall have come into force. CHAPTER II 3. Amendment of section 10, Act XI of 1922.--In section 10 of the Income-tax Act,-- (1) in sub-section (2),--... (ii) in the second proviso to clause (vii), for the words 'is sold' the words 'is sold, whether during the continuance of the business or after the cessation thereof, 'shall be substituted;" "(3) The Taxation Laws (Extension to Merged States and Amendment) Act, 1949. (Received the assent of the Governor-General on the 31st December, 1949). ACT NO. LXVII OF 1949 CHAPTER II 3. Extension of Taxation Laws to Merged States.--(1) The following Acts, namely:--... (2) The Indian ?ncome-tax Act, 1922, the Business Profits Tax Act, 1947, and the Indian Finance Act, 1949, and all Rules and Orders made thereunder, shall operate as if they had been extended to, and brought into force in, all the merged States on the 1st day of April, 1949. "(4) Section 10(2)(vii): (vii) in respect of any such building, machinery, or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof....
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....ly to an assessment either for the assessment year 1948-49 or the assessment year 1949-50; (d) that the surplus realised was not chargeable as capital gains under section 12B of the Act as the sale was effected by the individual partners and therefore, fell within the exemption mentioned in the third proviso to sub-section (1) of section 12B; (e) that the excess receipts on the sale of stocks of sugar to the company on January, 1948, was not chargeable to tax. 9. The Income-tax Officer negatived the assessee's contentions. The Appellate Assistant Commissioner although agreeing with the assessee's contention that the second proviso to section 10(2)(vii) as amended would not apply to the assessment year 1949-50, confirmed the Income-tax Officer's finding as to the assessee's liability under the second proviso to section 10(2)(vii) on the ground that the assessee had sold the business to the company as a "going concern" and also confirmed the Income-tax Officer's findings regarding the liability to capital gains tax on the sum of Rs. 19,59,258 and tax liability in respect of excess receipt on the sale of stocks of sugar. 10. The Tribunal for the reasons....
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...., 1959, in Misc. Application No. 2316 of 1959 in I.T. Reference No. 315 of 1958, we hereby draw up a supplementary statement of the case. 2. The assessee was a firm consisting of six partners, viz.: (1) Lachmandas, (2) Mohanlal, (3) Mulkraj, (4) Banrasi Das, (5) Dwarka Das, and (6) Kanhaiya Lal. The accounting year relevant to the assessment year 1949-50 is the year ending September 30, 1948. The business of the assessee-firm was that of manufacture and sale of sugar, molasses, confectionery, golden syrup and extraction and sale of rice and oil. It also owned sugar mills in the form of land, buildings, plant and machinery for the purpose of the said business. 3. The said business was transferred as a going concern to a private limited company called R.B. Lachmandas Mohan Lal and Sons Ltd. (hereinafter called the company) by a deed of sale dated January 21, 1948. The issued capital of the private limited company was 4,000 shares of Rs. 1,000 each. The following are the shareholders with their respective shareholdings: Rs. (1) Lachmandas ... 7,21,000 (2) Mulk Raj ... 7,10,000 (3) Banarsi Das ... 6,80,00....
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.... 20, 1948, i.e., 41 days. A profit and loss account for the period ending January 20, 1948, was prepared. The sale of sugar during the period amounted to Rs. 25,56,144-14-3. Of this, Rs. 21,50,148-8-6 represents the transfer of stock of sugar to the company. The profit during this period amounted to Rs. 3,53,256-13-6. This was credited to the six partners in proportion to their profit sharing ratio. 5. The assessee furnished a return of income on September 15, 1949, for the previous year ending September 30, 1948, showing an income of Rs. 3,07,593-11-9. Another return was filed on February 25, 1950, showing an income of Rs. 2,75,713 after adjusting for certain revenue expenses incurred by the company on behalf of the firm. On April 10, 1952, yet another return was filed showing an income of Rs. 76,015-10-6. 6. The assessee sold 20,143 bags of "old sugar" prior to the transfer of the business to limited company and 5,838 bags and 117½ maunds of opening stock were (sold) to the company. The sale value was Rs. 12,77,918-10-0 and Rs. 5,41,040-2-3 respectively. Similarly in regard to new sugar the sales to outsiders prior to the transfer to the company were 7,692 bags for R....
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....The only difference is that instead of selling sugar in piecemeal to several dealers, the assessee sold the same in bulk to the private limited liability company. 11. On these facts, the question of law is: "Whether the excess receipts on the transfer (sale) of the stock of sugar to the limited concern is chargeable to tax under section 10 of the Income-tax Act?" 12. The order of the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal have already been annexed and form part of the case in the connected reference by the assessee (R.A. No. 462 of 1957-58). 13. The draft statement of the case was placed before the parties. The suggestions made by the department's representative and the assessee's counsel have been carried out. The statement is finalised. B. L. Gupta, Ashoke Gupta and L. D. Seth, for the assessee R. L. Gulati, for the Commissioner JUDGMENT The judgment of the court was delivered by R.S. PATHAK J.--The assessee is a firm consisting of six partners. It carried on business in the manufacture and sale of sugar, molasses, confectionery and also in the extraction and sale of oils. It owned a sugar mill. On January 21, ....
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....pital gains under section 12B of the Income- tax Act?" The assessee had also sought the reference of some other questions to this court, and as those questions were not referred by the Tribunal, an application was made to this court, purporting to be under section 66(4) of the Act, praying that a statement of the case in respect of those other questions should be requisitioned. This application was allowed on August 3, 1959, and consequently, the Tribunal submitted a supplementary statement of the case dated September 23, 1959, to this court for its opinion on the following further questions: "Whether the excess receipts on the transfer (sale) of the stock of sugar to the limited concern is chargeable to tax under section 10 of the Income-tax Act?" Learned counsel on behalf of the Commissioner of Income-tax has raised a preliminary objection to our entertaining the supplementary statement of the case. He urges that the application, upon which this court called for a statement in respect of a further question of law and consequent to which the supplementary statement was submitted to this court, was an....
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.... for the assessee that the order disposing of the application had become final much before the decision of the Supreme Court in Kamlapat Motilal's case* and it is urged that we should hold that the decision of the Supreme Court cannot undo the effect of that order which had become final. It is pointed out that the supplementary statement of the case was also submitted before the date of the Supreme Court decision. There is no doubt that the order of this court on the application and the submission of the supplementary statement of the case precede in point of time the decision of the Supreme Court. But that circumstance, it seems to us, can be of no assistance to the assessee. The Supreme Court in Kamlapat Motilal's case [1962] 45 I.T.R. 266 (S.C.) merely stated what the law always was. That being so, clearly the application was not maintainable under section 66(4), and the order of this court calling for a reference upon a further question was entirely without jurisdiction. The consequent reference made by the Tribunal must, therefore, be considered as incompetent. We are, accordingly, of the opinion that the preliminary objection must be upheld. In the result, we decline ....
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.... the contention on its merits. It seems to us that the decision of the Bombay High Court turned upon the consideration that the persons who originally held the shares and persons to whom the shares were allotted subsequently upon transfer when the limited company was incorporated were the same. Chagla C.J. who delivered the judgment of the court, observed: "Sir Homi Mehta owned these shares jointly with his sons. The result of the formation of this private limited company and the so-called sale of these shares to the limited company was that these very shares instead of being held by Sir Homi Mehta and his sons jointly in their individual capacity were held by these very persons constituted into a limited company. We are quite conscious of the distinction which has been constantly emphasised by the Advocate-General in this reference between an individual as an entity and a limited company as an entity. and there can be no doubt that in law Sir Homi Mehta and his sons were very different entities from Sir Homi Mehta & Sons Limited. But what the Advocate-General is doing is looking at the matter from a legal ....