COMMISSIONER OF INCOME TAX BOMBAY CITY II BOMBAY Vs. NATIONAL SYNDICATE BOMBAY
LAWS(SC)-1960-11-23
SUPREME COURT OF INDIA (FROM: BOMBAY)
Decided on November 01,1960

COMMISSIONER OF INCOME TAX,BOMBAY CITY Appellant
VERSUS
NATIONAL SYNDICATE,BOMBAY Respondents


Referred Judgements :-

LIQUIDATORS OF PURSA LIMITED VS. GOMMR OF INCOM TAX BIHAR [DISTINGUISHED]





JUDGEMENT

Hidayatullah, J. - (1.)The Commissioner of Income-tax, Bombay Circle II, has filed this appeal after obtaining special leave, against the judgment of the High Court of Bombay in an Income-tax reference under S. 66(2) of the Income-tax Act. The National Syndicate, Bombay (referred to in this judgment as the respondent) was a firm consisting of three partners. This firm acquired on January 11, 1945, a tailoring business as a going concern from one Chambal Singh for Rs. 89,321/-. Included in this amount was the consideration paid for sewing machines (Rs. 72,000) and a motor lorry (Rs. 8,000). The assessment concerns the year of account of the respondent, January 11, 1945 to February 28, 1946. The business of the respondent was to prepare garments for Government departments, and during the war years, this appears to have been profitable business. Immediately after the respondent acquired this business, the last war came to an end, and the respondent found it difficult to continue the business. It, therefore, closed its business in August, 1945. Between August 16, 1945 and February 14, 1946, sewing machines were sold at a loss of Rs. 41,998/-. The motor lorry was also sold on February 14, 1946, at a loss of Rs. 3,700/-. The respondent closed its account books on February 28, 1946, showing the two losses and writing them off.
(2.)For the assessment year, 1946-47, the respondent claimed a deduction of Rs. 45,698 under S. 10(2) (vii) of the Indian Income-tax Act. The Income-tax Officer disallowed this deduction, holding that the loss was of a capital nature, and that inasmuch as the business of the respondent was not carried on after August, 1945, S. 10(2) (vii) was not applicable. This order of assessment was confirmed by the Appellate Assistant Commissioner, who also held that the loss represented capital loss, as the machines and the motor lorry were sold after the closure of the business. On appeal, the Appellate Tribunal, Bombay, also confirmed the order, holding that the sales of machines and the motor lorry were made in the course of the winding up of the assessee's business after the business had been stopped, and that, therefore, the deduction could not be claimed under S. 10(2) (vii).
(3.)The respondent asked the Tribunal to refer the questions of law arising from its order, but the request was refused. It then moved the High Court, and obtained an order under S. 66(2) of the Income-tax Act, and the following two questions were referred:
"1. Whether the Tribunal was justified in law in holding that the petitioner had carried on its business only till twenty-eighth day of August one thousand nine hundred and forty-five

2. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in not allowing the sum of Rs. 41,998/- (Rupees forty-one thousand nine hundred and ninety eight) on sale of machines and Rs. 3,700/- (Rupees three thousand and seven hundred) on the sale of lorry as a deduction from the total income of the applicant -

;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.