GROVER - (1.) THESE appeals have been brought by certificate from a judgment of the Calcutta High Court in two Income-tax Reference.
(2.) IT is most unfortunate that the statement of the case contains certain omissions and errors and does not appear to have been drafted with the usual care with which such statements are drawn. The assessee Guzdar Kajora Coal Mines Ltd. which was incorporated on 4/07/1945 purchased by a deed of conveyance dated 3/04/1966 executed by the liquidators of Guzdar Kajora Colliery Co. Ltd. all the colliery lands, hereditaments and premises, mines, minerals, powers and privileges and all other here ditaments together with the machinery thereon belonging to the latter company. It was stipulated in the deed of conveyance that the sale was to be effective from 1/07/1945. The consideration for the transfer was Rs.6 lacs and was allocated as follows : "(a) the value of the machinery, plants, stores including stock of goods grains coals at the pithead and other movable properties appertaining to the said colliery the property in which is capable of passing by delivery being ... Rs.3,50,000/-. (b) the value of the buildings and structures belonging to the said colliery being....Rs.1,50,000.00. (c) the value of the rest of the properties appertaining to the said colliery not capable of being passed by delivery being....Rs.1,00,000.00". Soon after the assessee company came into existence it took over the business from the vendor company and claimed depreciation for the assessment year 1946-47 on the basis of the figures the comparative statement of which is given in the statement of the case. This statement contains the written down value as per the assessment record of the vendor company the valuation of the assets as per the balance sheet of the vendor company and the valuation by the assessee company as per balance sheet as on 30/12/1945. The Income-tax Officer allowed depreciation on the basis of those figures. This state of affairs continued till the assessment year 1952-53 when the Income-tax Officer again allowed depreciation on the old basis. Before the Appellate Assistant Commissioner the assessee raised a ground that the Income-tax Officer should have worked out the depreciation figures on the basis of balance sheet valuation of the assets as per the audited accounts submitted by the assessee and as claimed in the return. With regard to the assessment year 1953-54 the same position was taken up. The assessee appealed to the Income-tax Appellate Tribunal, having failed in its contentions before the Appellate Asst. Commr. It was contended before the Appellate Tribunal by the assessee that although it had paid a sum of Rs.6 lacs as consideration for the transfer of the mines the value taken by the department for the purpose of determining depreciation was much lower. It was pointed out that the purchase had been made after obtaining the opinion of an expert and the assessee was being subjected to great hardship by depreciation being determined only on the old written down value of the assets and not on the basis of the original cost of acquisition. The Appellate Tribunal was of the view that substantial injustice would result to the assessee if the depreciation continued to be allowed on the old basis if the case of the assessee had any substance. It was felt that a proper investigation as to the value paid by the assessee in taking over the old company was necessary. The matter was remanded to the Income-tax Officer to hold an inquiry after giving an opportunity to the assessee to place all the available material in support of its claim. With regard to the assessment year 1953-54 also the case was remanded with similar directions.
(3.) THE Income-tax Officer made a report of 6/07/1960. According to his findings some of the Directors and Shareholders of the two companies were the same and they were connected in many ways. Furthermore the valuation of the depreciable assets and the consumable stores had been written up whereas the valuation of the non-depreciable assets like mines etc. had been written down. As regards the report of the expert A. N. Mitter dated 1/09/1945 he was unable to contact him in spite of making an effort to do so. THE report made by the second expert S. N. Mullick dated 19/10/1955 and 30/01/1957 together with the clarification made by him on 20/11/1959 were considered by him. He also examined S. N. Mullick under S.37 of the Indian Income-tax Act, 1922, hereinafter called the 'Act'. He came to the conclusion that the vendor had been making good profits but no provision had been made for the goodwill of the company in the business and if such a provision had been made it would have worked out at Rs.2,56,960.00 having regard to the profits made for the preceding four years. He made an allocation of Rs.6 lacs as follows : JUDGEMENT_436_2_1972Html1.htm Before the Appellate Tribunal the remand report of the Income-tax Officer was assailed on behalf of the assessee on various grounds. The Tribunal observed that when the assessments for the years 1946-47 and 1947-48 were made the assessee chose to give the valuation in its balance sheet on a certain basis which was accepted and no appeal was taken to the higher authorities and although the rule of estoppel could not be applied but "acquiescence of the assessee shows which way the wind blew". When a settled thing was sought to be reopened the Income-tax Officer had a right to see whether there was any justification for the "radical departure from the settled practice". It was held that the Income-tax Officer was to go behind the valuation. As regards the good-will the contention raised on behalf of the assessee was that the same was included in the item of one lakh mentioned in the sale deed. According to the report of Mr. Mullick it was included in the item of Rs.3,50,000. This is what the Tribunal proceeded to observe : "It seems to us, the simple truth of the matter is that the figure of Rs.3,50,000.00, Rs.1,50,000.00 and Rupees 1,00,000 were arbitrarily put and there was no clear cut or understandable break up of valuation (?) clause 3 of the break up in the deed of 3/04/1946, which talks of the value of the rest of the properties appertaining to the said colliery not capable of being passed by delivery being valued at Rs.1,00,000.00 shows that these properties which had not been in clauses 1 and 2 were comprised in this and it seems too much to say that good-will is included in this. It would be more true to say that good-will was thought of or conceived of but not provided for in the break up of valuation". ;