TaxTMI 
TaxTMI 
2003 (5) TMI 46
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal assessed the said amount both to capital gains and to income from business, having regard to section 41(2) of the Income-tax Act, 1961. The undertaking was valued at Rs. 88 lakhs by an order of the learned Tribunal passed on May 15, 2000. Subsequently, the assessee filed an application under section 254(2) of the Income-tax Act, 1961. Relying on CIT v. West Coast Chemicals and Industries Ltd. [1962] 46 ITR 135 (SC) and CIT v. Mugneeram Bangur and Co. (Land Department) [1965] 57 ITR 299 (SC), the assessee contended that the undertaking having been sold at a slump price and no amount being attributable to depreciable and non-depreciable assets, distinctly, the decision of the learned Tribunal was a mistake apparent from the record that required to be corrected. This application under section 254(2) having been dismissed, the present appeal has been filed under section 260A of the Income-tax Act. This appeal has since been admitted. Now we are called upon to answer the question as to whether this slump price would be subjected to tax under the head "Income from business" having regard to section 41(2) of the Income-tax Act, 1961. Mr. S. Bagchi, learned counsel for the appellant,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being charged under the head "Income from business". He had relied on the decision in CIT v. Artex Manufacturing Co. [1997] 227 ITR 260 (SC) and CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC), in order to support his contention. He had distinguished in Mugneeram Bangur's case [1965] 57 ITR 299 (SC); Electric Control Gear Manufacturing Co.'s case [1997] 227 ITR 278 (SC) and West Coast Chemicals and Industries Ltd.'s case [1962] 46 ITR 135 (SC). According to him, there being materials available on record to indicate the amount attributable to non-depreciable assets the decisions in Mugneeram Bangur's case [1965] 57 ITR 299 (SC); Electric Control Gear Manufacturing Co.'s case [1997] 227 ITR 278 (SC) and West Coast Chemicals and Industries Ltd.'s case [1962] 46 ITR 135 (SC), would not be applicable. On the other hand, the ratio laid down in Artex Manufacturing Co.'s case [1997] 227 ITR 260 (SC) would be attracted. The question has to be looked into according to the scheme of the Act itself. The Act deals with taxes on income. It is income, which is being taxed. In order to tax an income, the assessment of the income is to be computed and then on the basis of the computation of the income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an be assessed. In this case, this undertaking was transferred and the market value was determined by the arbitrator, who had awarded a slump price without attributing any part of the amount to any particular head. What amount was payable on account of non-depreciable assets and what amount was payable on account of depreciable assets cannot be determined unless there are some means to indicate the value of the depreciable or non-depreciable assets. The balance-sheet might be the value of the undertaking in respect of different items mentioned therein, but when the amount is exactly the amount shown in the balance-sheet, then it may be a case where there are materials to determine the different heads to which the price could be attributable according to the balance-sheet. But when the moneys payable is more or less than the figures shown in the balance-sheet, in that event, unless there is other material to indicate what amount was attributed to depreciable or non-depreciable assets, it is not possible to determine the same simply by guessing or by any such other method. The deduction of the price of the land shown in the balance sheet would not help us in the present case since th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount, namely, the difference between the written down value of the plant, machinery and dead stock as per the assessee's books and the value of the same as revalued by Hargovandas Girdharlal. In Doughty v. Commissioner of Taxes [1927] AC 327, the Privy Council was concerned with the facts that there was a sale of entire assets including goodwill in lieu of allotment of fully paid shares with an agreement by the company to discharge all the liabilities. The nominal value of the shares being more than the sum to the credit of the capital account of the partnership in its last balance-sheet, a new balance-sheet was prepared showing a larger value for the stock-in-trade. The increase in value so shown was treated as profit on the sale of the stock-in-trade under the Land and Income Tax Act, 1916 of New Zealand and thus tax was imposed on all profits or gains derived from any business. With these facts, the Privy Council had held the transaction was a sale. There was no separate sale of the stock. No value of the stock as an item formed part of the aggregate, which was sold. The Privy Council observed that income-tax is a tax upon income. It is well established that the sale of a whole ....