SANKAR PRASAD MITRA, J. - (1.) THIS is a reference under s. 66(1) of the Indian IT Act, 1922. The assessment year is 1945-46. On the 21st March, 1944, the assessee paid Rs. 6,50,000 to M/s F. W. Heilgers & Co. Ltd., the managing agents of Churulia Coal Co. Ltd. The amount was paid as consideration for the purchase of the Churulia Coal mine. THIS colliery was worked till 15th August, 1944. On 1st May, 1944, the assessee paid a sum of Rs. 7,500 to the said F. W. Heilgers & Co. Ltd., as consideration for the purchase of the mines, veins, seams or seam strata layers, and beds of fireclay in the land of the mine called "Churulia Mine".
(2.) ON the 13th July, 1944, a company called the New Churulia Coal Co. Ltd. was incorporated. ON August 16, 1944, the assessee received a sum of Rs. 6,50,000 from the New Churulia Coal Co. Ltd. as consideration for the purchase of the coal mine. On January 5, 1945, the assessee sold the mines, veins, seams or seam strata layers and beds of fireclay in the coal mine to the New Churulia Coal Co. Ltd. at a price of Rs. 1,10,000. The conveyance for the sale of the mining rights was executed by the Churulia Coal Co. Ltd. on the 28th August, 1944. There was no deed of conveyance in favour of the assessee at all. As regards the fireclay rights, the conveyance was first executed by Churulia Coal Co. Ltd. in favour of the assessee and, later on, the assessee executed a deed of conveyance in favour of the New Churulia Coal Co. Ltd. on the 27th August, 1945.
(3.) THE assessee entered the transactions in its account books in the following way : 21-3-1944 :M/s F. W. Heilgers & Co. a/c.--On a/c. Churulia Coal Co. Ltd. --By amount paid to them through cheque in respect of consideration money for Churulia Colliery-Rs. 6,50,000. 1-5-1944 :M/s F. W. Heilgers & Co.--On a/c. Churulia Coal Co. Ltd.-- By amount paid to them in full settlement of Churulia Fireclay rights as per receipt attached--Rs. 7,500. 16-8-1944 :A/c. Churulia Coal Co. Ltd., amount received from them Repayment of consideration money advanced to a/c. F. W. Heil-- gers & Co. on their behalf-Rs. 6,50,000. 5-1-1945 :A/c. New Churulia Coal Co.--Cheque No. received from them being the full value of Churulia Fireclay mining rights sold to them--Rs. 1,10,000. From the above facts the Tribunal was of the view that the assessee purchased both the colliery and fireclay rights attached to the colliery for the purpose of transferring the same to the New Churulia Coal Co. Ltd. The Tribunal has said that the mine was situated at the village, Churulia, and for that reason the company carrying on the mining operations in that area was named Churulia Coal Co. Ltd. The said Churulia Coal Co. Ltd. received a sum of Rs. 6,50,000 from the assessee as consideration for the sale of the mine. About four months after the receipt of this money, says the Tribunal, a new company was incorporated in the name of New Churulia Coal Co. Ltd. on the 13th July, 1944. The Tribunal has inferred from the date of incorporation that the arrangement for incorporating the new company was made some time before that date. Immediately after the incorporation, the New Churulia Coal Co. Ltd. purchased the coal mine and paid the sum of Rs. 6,50,000 to the assessee. The conveyance was executed, the Tribunal points out, by the Churulia Coal Co. Ltd. directly in favour of the New Churulia Coal Co. Ltd. According to the Tribunal it was clear to the promoters of the newly incorporated company that the said Churulia Coal Mine would be acquired by them, otherwise it was not usual for them to incorporate the company in the name of New Churulia Coal Co. Ltd. The Tribunal says that this new name indicates the intention of incorporation. Further, the Tribunal says, the account books of the assessee showed that on the 16th August, 1944, the assessee received a sum of Rs. 6,50,000 from the New Churulia Coal Co. Ltd. as repayment of consideration money advanced to account F. W. Heilgers & Co. on their behalf. This entry also clearly indicated, according to the Tribunal, that the sum of Rs. 6,50,000 was paid to F. W. Heilgers & Co. on behalf of the New Churulia Coal Co. Ltd.;