Bhagwati, J. - (1.) This appeal with special leave under article 136 of the Constitution is directed against the refusal by the High Court of Patna to require the Income-tax Appellate Tribunal to state a case and refer to it the question of law namely :"Whether under the facts and circumstances of the case, the amount of Rs. 1,30,785 being the excess of sale proceeds of the building, plant and machinery over the written down value of the business of the said newspapers publications could in law be termed to be income, profits and gains of the petitioner -
(2.) The facts which led to this appeal may be shortly stated. The appellant was the sole proprietor of the business which he carried on of publishing tow news-papers, namely "The Indian National" and "Aryavart" and which business had some assets. The Income-tax authorities had from time to time allowed to the appellant depreciation on the said assets for several years. In the accounting year 1356 Fasli corresponding to the assessment year 1950-1951, the appellant converted his said proprietary business into a private limited company. The entire capital of the newly-floated private limited company came out of the pocket of and was subscribed for by the appellant. The said newspapers publications and their assets were transferred from the sole proprietorship of the appellant to the newly floated private limited company of which the entire share capital was subscribed for and paid by the appellant. The appellant was allotted by way of consideration for the said transfer 25,000 shares of the said company out of which he held in his own name 24,950 share, the remaining 50 shares having been allotted at his instance to the names of his nominees by way of directors qualification shares.
(3.) On the said transfer certain valuation was put on these assets. The written down value of the building as on the 30th September, 1948, was Rs. 29,669, the original cost thereof including the cost of subsequent additions being Rs. 49,270. The written down value of the machines and the plants as on the 30th September, 1948, was Rs. 1,19,368 as against the original cost thereof including subsequent additions which came to Rs. 2,30,552. There was thus a difference of Rs. 1,30,785 which represented the total amount of depreciation which had been allowed by the Income-tax authorities on these assets up to that date. When the valuation was put on these assets for the purpose of the transfer, the valuation of the building with subsequent additions showed an appreciation of Rs. 54,599 and the appreciation in regard to the machinery and plant together with subsequent additions came to Rs. 1,51,744. The appreciated value of these assets therefore aggregated to Rs. 2,06,343 which was in excess of the depreciation amount already allowed namely, Rs. 1,30,785. The Income-tax Officer while assessing the appellants income for the assessment year 1950-51 was of the opinion that the appellant had sold to the private limited company these assets at an appreciated value and realised profits thereby and since the difference between the original cost and the written down value, namely Rs. 1,30,785, was less than the appreciated sale price of Rs. 2,06,343, the entire amount of Rs. 1,30,785 was income, profits or gains in the hands of the appellant liable to be assessed during the relevant assessment year, and assessed the same accordingly.;