COMMISSIONER OF INCOME TAX Vs. MORNING STAR BUS SERVICE
LAWS(KER)-1963-2-26
HIGH COURT OF KERALA
Decided on February 18,1963

COMMISSIONER OF INCOME-TAX, KERALA Appellant
VERSUS
MORNING STAR BUS SERVICE. Respondents


Cited Judgements :-

JAGDEV SINGH MUMICK VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-1970-10-10] [REFERRED]
COMMISSIONER OF INCOME TAX VS. JANAB N HYATH BATCHA SAHIB [LAWS(MAD)-1968-6-12] [REFERRED TO]
RAMASWAMI UDAYAR N VS. COMMISSIONER OF INCOME TAX GIFT TAX [LAWS(MAD)-1976-8-38] [REFERRED TO]


JUDGEMENT

- (1.)THIS is a reference by the Income-tax Appellate Tribunal, Madras Bench, under section 66(1) of the Indian Income-tax Act, 1922. The question referred is :
" Whether the sum of Rs. 45,698 is assessable to tax under the provisions of the second proviso to section 10(2) (vii) of the Income-tax Act ?"

(2.)THE assessment year with which we are concerned of five members, was carrying on a bus transport business in the accounting period relevant to the assessment year.
On June 1, 1955, the members of the association formed a private limited company and transferred to that company the business and assets of the association. There were no shareholders other than the members of the association, and no assets other than those transferred by the association.

The written down value of seven buses transferred to the company was Rs. 24,302. Their value, however, was entered in the books of the company as Rs. 70,000. The question for consideration is whether the difference between the two figures, namely, Rs. 45,698 is assessable to tax under the second proviso to section 10(2) (vii) of the Indian Income-tax Act, 1922.

(3.)SUB-section (2) of section 10 provides that the profits or gains of a business, profession or vocation should be computed after making the allowances specified therein. The allowance specified in clause (vii) of the sub-section is worded as follows :
" ... 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 exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value."

There are five provisos to clause (vii). The second of them is :

" Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place.

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