Decided on February 23,1965

Karamat Khan Appellant
Commissioner Of Income -Tax, U.P. Respondents

Cited Judgements :-



MANCHANDA J. - (1.)THIS is a case stated under section 66(2) of the Income -tax Act, 1922 (hereinafter referred to as the Act). The question referred i :
'Whether there was any material for the finding that the sum of Rs. 10,000 added to the profits in respect of the sale of three lorries in the previous year relevant for the assessment year 1949 -50 represented the difference between the original and the written down values of the three lorrie ?'

(2.)THE material facts are thes : The relevant year of assessment is the assessment year 1949 -50, the previous year being the financial year ending the 31st of March, 1949. The assessee, inter alia, derives income from plying of lorries. In the previous year the assessee plied eight lorries. Out of these he sold three lorries at a price of Rs. 36,100. The Income -tax Officer computed the profits on the sale of the aforesaid three lorries under the second proviso to section 10(2)(vii) at Rs. 19,728. In his assessment order he did compute or furnish the written down value of the three lorries but took the computation of written down value as made in respect of the assessment year 1948 -49, which assessment was also made on the same day as the assessment for the relevant year of assessment. For the assessment year 1948 -49 the initial cost of the eight lorries was estimated at Rs. 64,000, i.e., the cost in the assessment year 1944 -45. In other words, the initial cost was taken for each lorry at Rs. 8,000. This was purely on an estimated basis. The assessee had not furnished any particulars under proviso (a) to section 10(2)(vi) of the Act in this respect. Having estimated the initial cost at Rs. 64,000 for the eight trucks he then proceeded to work out the written down value for the subsequent assessment years and ultimately for the 1948 -49 assessment year the written down value of the eight trucks was worked out at Rs. 15,187. The written down value included the depreciation of Rs. 5,063, which was worked out for the assessment year 1948 -49, and in that assessment year this sum of Rs. 5,063 was actually allowed. In the relevant assessment year the written down value of Rs. 15,187 was taken as the basis and after allowing depreciation at 25%, the written down value worked out to Rs. 3,797. This sum was again actually allowed. As three lorries had been sold during the relevant previous year the question of computing the profit under the second proviso to section 10(2)(vii) of the Act arose. The written down value of the three trucks on a proportionate basis came to Rs. 4,272. As the three trucks were sold for Rs. 36,100 the profit under section 10(2)(vii) was worked out at Rs. 19,728.
On appeal, the Appellate Assistant Commissioner upheld this add -back of Rs. 19,728 on account of a balancing charge. Aggrieved, the assessee went up to the Income -tax Appellate Tribunal which not only reduced the estimated income the plying of lorries but also the profit under section 10(2)(vii) which was estimated at Rs. 10,000 against Rs. 19,728 taken by the departmental authorities.

(3.)THE assessees application under section 66(1) having been rejected he came up to this court contending, inter alia, that there did not exist any written down value in respect of the three lorries which were sold by him and since no depreciation had actually been allowed the question of determining the balancing charge under section 10(2)(vii) of the Act did not arise. The question, however, that was directed to be referred was the one stated hereinabove.

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