TaxTMI 
TaxTMI 
1966 (9) TMI 37
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.... the agreement the appellant-company purported to transfer seven items of property described in the schedules annexed to the deed : one of the properties so agreed to be transferred was described in the second schedule--a building at Connaught Place, New Delhi, valued at Rs. 2,24,673. No deed of conveyance was executed in pursuance of the agreement. It is, however, common ground that on July 1, 1952, Messrs. Phelps & Co. Ltd. took over possession of the properties agreed to be sold. The original cost of the building described in the second schedule was Rs. 97,258 and the written down value of the building after deducting depreciation allowed from time to time in the records of the Income-tax Officer was Rs. 57,011. In the balance-sheet of the appellant-company dated March 31, 1953, the building was valued at Rs. 2,24,673, the price for which it was agreed to be sold. In proceedings for assessment for the account year 1952-53, the Income-tax Officer, Companies District IV, Calcutta, brought to tax the difference between the original cost and the written down value of the building on the date of the transfer as deemed profit of the appellant-company under the second proviso to sec....
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....ssrs. Phelps & Co. Ltd., and the appellant-company " continued to exist side by side as two separate limited companies " and carried on business simultaneously for more than ten years is borne out by no evidence on the record. This criticism has force. The High Court in a reference under section 66(1) or (2) is bound to proceed on the findings recorded by the Income-tax Appellate Tribunal : it has no power to admit or record additional evidence, as the High Court did, and to consider that additional evidence which was not placed before the Tribunal. We must therefore proceed on the view that there is no evidence before the Tribunal and no finding of the Tribunal that after transferring its assets the appellant-company carried on business. Counsel for the company also submitted that the Tribunal was in error in observing that the appellant-company had transferred all its assets and liabilities to the new company. But in the statement of the case, which is based upon the judgment of the Tribunal, there is a clear recital that all the assets and liabilities of the appellant-company were transferred to Messrs. Phelps & Co. Ltd. Counsel asked us to ignore that statement in view of th....
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.... written down value, and the difference between the original cost of the assets and the written down value was brought to tax under section 10(2)(vii) of the Income-tax Act. The High Court held that the transfer of the assets of the firm to the company was merely a readjustment made by the members to enable them to carry on their business as a company rather than as a firm and no profit in a commercial sense was made thereby, and, therefore, the transfer of the assets of the firm to the company was not a sale and the provisions of the second proviso to section 10(2)(vii) did not apply. Chagla C.J., in delivering the judgment in Sir Homi Mehta's Executors' case, observed at page 932 : " Whatever legal or technical form a transaction may take, the court must try and determine what the real transaction was and not the form which the transaction took. " Again the learned Chief Justice in Rogers & Co.'s case, observed that in all transactions which come up for consideration in a taxing statute the court has to look not at the legal form which the transaction has, but to the real nature of the transaction. Counsel for the revenue contends that in ignoring the legal form and rely....
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....ery and plant were transferred to the company was not a notional figure, and the price being in excess of the cost of buildings, machinery and plant, section 10(2)(vii), proviso, was attracted, and the difference between the written down value and the original cost was held taxable. It is unnecessary for the purpose of this case to express any final opinion on the question, whether in taxing cases it is open to the assessing authority to ignore the corporate personality of a company and to hold that the interest of the shareholders in the shares of a company and on the business of the company is identical, and transfer by the owners of a business to a company in which the shares are owned by the former owners of the business does not give rise to a sale in a commercial sense. The present is not a case in which persons carrying on business have floated a private limited company and have attempted to readjust their business position. Here is a case in which the assets of one company have been sold to another. The question to which attention must be directed is whether there was by the agreement a transaction of sale in a commercial sense. In a recent judgment of this court in C....
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.... shares was less than their face value, the claim made by the appellant-company must fail. The burden of proving that the consideration for sale of the property was less than what it purports to be under the agreement of sale lay upon the company and since no attempt was made to prove that fact, the question cannot be raised for the first time in this court. It was also said that the transfer was a slump sale of the assets and there being no separate sale of the property described in the second schedule, the difference between the written down value and the cost price was not liable to be included as income in the process of assessment. Reliance in this behalf was placed upon the observations of the Judicial Committee of the Privy Council in Doughty v. Commissioner of Taxes. In that case two partners carrying on business as general merchants and drapers sold the entire assets and goodwill of the partnership business to a limited company in which they became the only shareholders. 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....