COMMISSIONER OF INCOME TAX Vs. JOGTA COAL CO LTD
LAWS(CAL)-1963-5-10
HIGH COURT OF CALCUTTA
Decided on May 03,1963

COMMISSIONER OF INCOME TAX Appellant
VERSUS
JOGTA COAL CO. LTD. Respondents


Referred Judgements :-

CRADDOCK VS. ZEVO FINANCE CO. LTD. [RELIED ON]
PINDI KASHMIR TRANSPORT CO. LTD. VS. CIT [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. HARVEYS LIMITED [REFERRED TO]
VIJAYARANGA MUDALIAR G VS. COMMISSIONER OF INCOME TAX [REFERRED TO]



Cited Judgements :-

INDIA FOILS LTD VS. INCOME TAX OFFICER [LAWS(CAL)-1970-5-9] [REFERRED TO]


JUDGEMENT

SANKAR PRASAD MITRA, J. - (1.)THIS case has been referred to us pursuant to a judgement of the Supreme Court, Jogta Coal Co. Ltd. vs. CIT. (1959) 36 ITR 521 (SC) The Appl. before the Supreme Court (the applicant before us), purchased the entire right, title and interest in the leasehold property in a coal mine from the lessee for the price of Rs. 23,00,000, out of which Rs. 13,00,000 were to be deemed to be paid in respect of the underground and surface rights and other appurtenances and benefit of the assignment of uncompleted orders and contracts, and Rs. 10,00,000 as the value of the machinery, stores, furniture, stocks, etc. In the Income-tax and business profits tax assessments of the applicant the ITO did not accept the allocations, as mentioned in the sale deed, and valued the plant and machinery at Rs. 3,50,000 and allocated a part of the consideration, namely, Rs. 7,50,000, towards goodwill, even though there was no mention of the sale of the goodwill in the sale deed itself. The AAC confirmed the estimate of the ITO. The Tribunal however, put it own value on the assets estimating the value with reference to the prevailing market conditions of plant and machinery at Rs. 6,00,000 and of goodwill at Rs. 4,00,000. Both the Tribunal and this Court dismissed the applications of the applicant for a reference. Delivering the judgment of this Court, Chakravartti C.J. observed as follows : "There appears to have been no content at all between the parties at the hearing of the appeal as regards the heads between which the purchase price was to be distributed. The only contest appears to have been with regard to the sums to be allocated to each head. It is stated by the Tribunal in the order made on the application for a reference that the learned counsel for the assessee appearing before them at the hearing of the appeal, conceded that the question reduced itself to one of estimates. That is disputed. But whether or not any express concession was made, there is no trace in the order of the Tribunal that there was any contest or that any of the seven questions proposed for reference to this Court was raised or debated in any shape or form. That being so, the case does not come under s. 66(2) of the act and consequently, it is not a case where we can or ought to direct the Tribunal to make a reference."
(2.)THE applicant preferred an appeal to the Supreme Court. THE Supreme Court was of the view that the questions : (1) Whether on the interpretation of the sale deed it could be said that any goodwill was purchased by the appellant; and(2) Whether the ITO was competent to go behind the sale deed and adopt his own value of the assets, were questions of law which arose out of the order of the Tribunal. Kapur J., delivering the judgment of the Supreme Court in Jogta Coal Co. Ltd. vs. CIT (supra), has been pleased to observe as follows :
"... we think that the following two questions of law arise out of the order of the Tribunal and a reference should have been made to the High Court. THEse two questions were sought to be raised by the appellant under s. 66(1) of the Act, and again before the High Court under s. 66(2) of the Act : '(1) Whether on the interpretation of the sale deed it can be said that any goodwill was purchased by the assessee ? ... (7) Whether in view of the said proviso to s. 10(5) (a), the ITO, on the facts and circumstances arising out of this case, was competent to go behind the conveyance and fix a valuation of his own in the way he has done ?' Question No. (1) was not allowed by us to be argued because the matter was not taken in the statement of case on behalf of the appellant, and the only question which survives for consideration is second one, i.e., No. 7, and this question, as it is, or with modifications, should have been referred to the High Court. We, therefore, direct that the question with the necessary modification if any, be referred and the case stated in accordance with s. 66(1) of the IT Act..."

In view of the above directions of the Supreme Court, the Tribunal has stated the case. It appears from the statement of the case that the assessee, i.e., the Jogta Coal Ltd., was incorporated on September 14, 1945. The two brothers E. C. Agabeg and A. A. Agabeg, were lessees of a coal mine situate in the village of Jogta, in the Jharia coalfield are, which belonged to the Raja of Jharia. The two brothers installed on the land leased to them plant and machinery and erected building and inclines and started working the coal mines. On April 10, 1935, the two brothers constituted themselves into a private limited company called Agabeg Brothers Ltd.

On July 19, 1945, Agabeg Brothers Ltd. agreeed to transfer to S. K. Bajpai all its right, title and interest in the leasehold property with other mokarari pottahs (perpetual leases) and a decree, which was passed in its favour, together with all appurtenances, including houses, huts and other erections belonging to the vendor, all machinery, plant, stores, furniture, etc., and "the benefit of the uncompleted balance of all orders and contracts for the supply of coal existing at the date of the completion of the sale." To this agreement were attached to schedules giving the list of the properties which were to be sold. A sum of Rs. 1,00,000 was to be paid as earnest money and the balance was to be paid at the time of the sale. Out of the sum of Rs. 23,00,000, the sum of Rs. 13,00,000 was to be paid in respect of the price of the underground and surface rights and other appurtenances and the benefit of the assignment of the balance of uncompleted order and contracts, and the sum of Rs. 10,00,000 as the price of the machinery, stores, furniture, stocks, etc. Another clause of the contract was that Agabeg Brothers Ltd. was to go into voluntary liquidation to give effect to the agreement for sale. There were certain leasehold right in favour of third parties. Under cl. 12 of the agreement, those third parties were to attorn to the purchaser on the completion of the sale.

(3.)ON October 15, 1945, Agabeg Brothers Ltd. went into voluntary liquidation, and two liquidators were appointed. ON December 28, 1945, and indenture evidencing the sale in favour of the applicant before us was executed to which the parties were, the liquidators, the debenture- trustees, Bajpai and the Jogta Coal Company. The balance of the sale price, i.e., Rs. 22,00,000 which was remaining due, was paid to the vendor in accordance with the terms of the agreement and acknowledged in the sale deed.
The accounting years were the two years ending December 31, 1946, and December 31, 1947, and the assessment year were 1947- 1948 and 1948-1949. According to the Tribunal, the point in controversy is the amount on which the appellant was entitled to calculate the deduction allowance for purposes of depreciation under s. 10(2) (vi) of the Indian IT Act.



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