R B LACHMAN DAS MOHANLAL AND SONS Vs. COMMISSIONER OF INCOME TAX
LAWS(ALL)-1964-4-1
HIGH COURT OF ALLAHABAD
Decided on April 08,1964

R.B. LACHMAN DAS MOHANLAL And SONS Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents





Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. BHARAT NIDHI LIMITED [LAWS(DLH)-1983-9-12] [REFERRED TO]
RAMASWAMI UDAYAR N VS. COMMISSIONER OF INCOME TAX GIFT TAX [LAWS(MAD)-1976-8-38] [REFERRED TO]
JAGDISH SUGAR MILLS LIMITED VS. COMMISSIONER OF INCOME TAX LUCKNOW [LAWS(SC)-1986-7-31] [DISTINGUISHED]
S K TRADING CORPORATION VS. INCOME-TAX OFFICER [LAWS(CAL)-1984-4-47] [REFERRED]


JUDGEMENT

R.S.PATHAK,J. - (1.)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 21st Jan., 1948, the business was transferred as a running concern by the assessee to a private limited company, R.B. Lachmandas Mohanlal & Sons, Ltd., which was incorporated the previous day. On the date on which the company was incorporated, the assessee entered into an agreement to sell the business to the company, and on 21st Jan., 1948, a sale deed was executed. Under the terms of the sale deed, the consideration for the land, building, machinery, plant and other assets was determined at Rs. 30,00,000. The original cost of the assets, on which depreciation was allowed to the assessee under the IT Act, was Rs. 10,40,742 and the written down value of these assets was Rs. 5,34,185.
(2.)DURING the assessment proceedings for the asst. yr. 1949 -50 (the relevant previous year being the year ending 30th Sept., 1948), the ITO applied the second proviso to S. 10(2)(vii) of the Indian IT Act, 1922, and held that a sum of Rs. 5,06,557 was liable to be included in the assessee's total income. The ITO also came to the opinion that the sale of the assets by the assessee to the company resulted in a capital gain of Rs. 19,59,258 and assessed this sum under S. 12B of the Act. Besides, the assessee had also sold its stocks of sugar to the company resulting in a profit of Rs. 2,05,041. The ITO treated this profit as arising out of the sale of the assessee's stock -in - trade and accordingly included it in the assessable income of the assessee.
The AAC dismissed the assessee's appeal against the inclusion of the amounts mentioned above in the assessment order, and an appeal before the Tribunal by the assessee was also unsuccessful. The assessee then applied for a reference to this Court under S. 66(1) of the Act, and the Tribunal has referred the following questions:

"(1) Whether, on the facts and circumstances of the case, the sale on 21st Jan., 1948, was by the assessee -firm or by its partners in their individual capacity ? (2) Whether, on the facts and circumstances of the case, the sum of Rs. 5,06,557 being the difference between the original cost and the written down value of assets is chargeable under S. 10 (2)(vii) of the Act ? (3) Whether, on the facts and circumstances of the case, the sum of Rs. 19,59,258 is chargeable as capital gains under S. 12B of the IT Act -

(3.)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 S. 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 3rd Aug., 1959, and consequently, the Tribunal submitted a supplementary statement of the case dt. 23rd Sept., 1959, to this Court for its opinion on the following further question:
"Whether the excess receipts on the transfer (sale) of the stock of sugar to the limited concern is chargeable to tax under S. 10 of the IT Act -



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