Rastogi, J. - (1.) THE Income-tax Appellate Tribunal, Delhi Bench 'B', hereafter referred to as "the Tribunal", has referred the following three questions for the opinion of this court: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that a part of the consideration received by the assessee on the transfer of the business as a going concern was referable to the plant and machinery ? 2. Whether, on the facts and in the circumstances of the case, profit under Section 41(2) on the transfer of such plant and machinery was rightly assessed ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee had no right of appeal against the levy of interest under Section 215 of the Income-tax Act, 1961 ?"
(2.) QUESTION No. 3 stands covered by the decision of a Full Bench of this court in CIT v. Geeta Ram Kali Ram [1980] 121 ITR 708. In view of that decision the Tribunal was right in holding that the assessee had no right of appeal against the levy of interest under Section 215 of the I.T. Act, 1961, hereafter "the Act ". The material facts which have given rise to questions Nos. 1 and 2 may now be stated. The respondent-assessee, M/s. Chandra Katha Indus tries, Najibabad, a partnership firm, carries on business in manufacture and sale of katha. For the assessment year 1972-73, the corresponding accounting period for which was August 1, 1970, to July 31, 1971, the assessee returned an income of Rs. 1,00,000 which was arrived at in the following circumstances. It had entered into an agreement to sell all its assets and liabilities to M/s. Subhash Chand Dinesh Chand Katha and Allied Industries Private Ltd. on July 31, 1970, i.e., the last date of the preceding accounting year. The consideration was agreed to be the book value of the assets and liabilities, the details being as under : JUDGEMENT_168_ITR138_1982Html1.htm This agreement was followed by a sale deed executed on August 1, 1970, in respect of land, building, plant and machinery, the consideration being, as noted above, Rs. 5,84,704.50 ; the book value of plant and machinery transferred was Rs. 4,08,278 and thereby the assessee earned a profit of Rs. 1,00,000 on the balancing charge and this amount was disclosed by it in its return as income under Section 41(2) of the I.T. Act. Subsequently, by a letter dated April 26, 1973, the assessee claimed that this amount was not taxable, since no such profit had accrued to it. It was also contended that the assessee had ceased to do any business on and from August 1, 1970, and hence there was no entity on which tax could be levied for this assessment year. The ITO did not accept these contentions and brought to tax the said amount of Rs. 1,00,000. The assessment was made in the status of an unregistered firm. 4. The assessee appealed and on its behalf the following contentions were raised before the AAC : (a) the assessee's business stood transferred as a going concern on the very first day of the relevant accounting year and thereafter the firm did not carry on any business. There could be no partnership without a business. If at all, the assessment could have been made in the status of an association of persons but that had not been done. Apart from that the members of this association having been assessed on their share in the profits of Rs. 1,00,000, a separate assessment on this association of persons also could not be made; (b) the benefit of profit under Section 41(2) of the Act having been realised by persons as individuals, the assessment of this amount in the hands of the firm was bad in law ; (c) the transaction was not a sale but only an exchange because the consideration was paid by allotment of shares of the vendee-company to the partners of the assessee-firm and acknowledgment of indebtedness ; and (d) that it was a case of transfer for a slump price and no particular sale consideration could be attributed to any particular asset. These sub-missions did not find favour with the AAC and he dismissed the appeal.
(3.) STILL aggrieved, the assessee took up the matter in further appeal to the Tribunal. The same submissions were reiterated on its behalf before the Tribunal but they were not accepted and the appeal was dismissed. Now, at the assessee's instance, the questions, indicated above, have been referred to this court. Two submissions were made before us on behalf of the assessee by its learned counsel, Sri R.K. Gulati : firstly, since the transaction was of a business as a whole, no part of the consideration could be attributed to the plant and machinery and it was only for purposes of executing a document of sale and stamp duty that the consideration of Rs. 5,84,704.50 was mentioned in the deed. The intention was to transfer the business as a whole and the net consideration was arrived at after setting off the liabilities from the book value of the different items transferred and hence Sub-section (2) of Section 41 of the Act will not be attracted. Sri Gulati also urged that it was a sale for a slump price also and for that reason also no part of the price could be attributed to any one particular item. It was also claimed that the consideration for the transfer was paid by the allotment of shares in the vendee-company to the partners of the firm. Thus, it was a case of exchange and not of sale and for that reason also Section 41(2) of the Act was not attracted. The second contention urged was that the transaction having taken place on 31st of July, 1971, i.e., during the accounting year preceding to the one under consideration, the profit, if any, could not be taxed in the year under consideration.;