KILLICK NIXON AND CO Vs. COMMISSIONER OF INCOME TAX
LAWS(BOM)-1962-10-1
HIGH COURT OF BOMBAY
Decided on October 12,1962

KILLICK NIXON AND CO. Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents


Cited Judgements :-

PREMIER AUTOMOBILES LTD VS. INCOME TAX OFFICER [LAWS(BOM)-2003-4-122] [REFERRED TO]


JUDGEMENT

V.S.DESAI J. - (1.)IN this case we have before us four questions, two of which were framed by the Tribunal on an application under S. 66(1) of the Indian IT Act made by the assessee and the other two on a requisition made by this Court under S. 66(2) of the IT Act. All the four questions relate to the capital gains which were found to have accrued to the assessee company in the asst. year 1949 -50. The assessee was a partnership concern carrying on various businesses in Bombay under the name and style of M/s Killick Nixon & Co. An agreement was entered into by the partners of the assessee firm on 20th Nov., 1947, with a company called "Killick Industries Limited" under which the said partners agreed to sell as on February 1, 1948, -
(1) the full benefit of the managing agency contracts held by the assessee firm; (2) the several shares and debentures held by the assessee firm including the 240 shares of the Cement Agencies Ltd.; and (3) all book and other debts.

(2.)THE consideration for the said sale was agreed to be Rs. 80 lakhs which was to be satisfied by an allotment of 79,993 shares of Rs. 100 each of the Killick Industries Limited and Rs. 700 in cash. In addition to this amount of Rs. 80 lakhs, a certain amount representing a part of the dividend that might be declared by the Cement Agencies Ltd. in respect of the financial year commencing on January 1, 1948, and which was subsequently quantified at Rs. 1,25,378 was also be paid to the assessee.
On January 29, 1948, another agreement was entered into by the partners of the assessee firm with a company called the Killick Nixon and Company Limited, under which they agreed to sell (a) the goodwill; (b) freehold and leasehold hereditaments; (c) plants and machinery; (d) stock -in - trade and book -debts; (e) Government securities and shares; and (f) full benefit of all shipping and general agencies, distributorships, etc. for a consideration of Rs. 10 lakhs to be satisfied by an allotment of 9,996 shares in the vendee company of Rs. 100 each and Rs. 400 in cash.

(3.)THE transactions as embodied in these two agreements were duly completed and the assessee firm was dissolved and its business was discontinued w.e.f. February 1, 1948. The account year of the assessee firm was the year ending on the 30th of June, 1948. For the assessment year 1949 -50, relevant previous year for which was the year ending with 30th June, 1948, the ITO proceeded to determine and tax the capital gains arising to the assessee firm on the sale of its capital assets under the agreements referred to above. It was contended by the assessee before. The ITO that there was no question of any capital before the ITO that there was no question of any capital gains having arisen to the assessee in the present case. In the alternative it was contended that as a matter of fact there had been a capital loss to the assessee on the basis of the valuation of the assets as on January 1, 1939. The ITO did not accept the contentions which were raised by the assessee before him and computed the capital gains at Rs. 32,01,747. The assessee appealed to the AAC against the decision of the ITO and repeated the contentions which were raised before the ITO. In view of the contentions raised by the assessee relating to the computation of the capital gains the AAC remanded the case to the ITO for a proper computation of the capital gains. At this stage considerable material was produced by the assessee relating to the question of the valuation of the assets on January 1, 1939. The ITO considered the entire material and submitted his report.


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