Ajit K. Sengupta, J. - (1.) In this reference under Section 256(1) of the Income tax Act, 1961, for the assessment year 1977-78, the following questions of law have been referred to this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income from the estate managed and run by the assessee-company with effect from April 1, 1973, by virtue of an agreement for sale entered into on November 20, 1973, but executed on August 12, 1976, for the period from January 1, 1976, to August 11, 1976, was not liable to be taxed in the hands of the assessee-company for the assessment year 1977-78 ?
(2.) Whether, on the facts and in the circumstances of the case, on a correct interpretation of Section 60 of the Income-tax Act, 1961, the Tribunal was right in applying the provisions of Section 60 of the said Act to the facts of the instant case?" 2. The facts relating to this reference are that the assessee entered into an agreement with Messrs. Dooars Tea Co. Ltd. for purchase of Ghatia Tea Estate as a going concern from April 1, 1973. Dooars Tea Co. Ltd. was a sterling company carrying on business in India through its agents, Messrs. Gillander Arbuthnot and Co. Ltd. The sale and transfer of the said tea estate required approval of the Reserve Bank of India and also the authorities in the United Kingdom and, therefore, the conveyance deed could not be executed immediately. Clause 6A of the agreement for purchase contemplated that pending completion of the sale, the purchaser should, at its own cost, carry on and maintain and have the management of the tea estate in consultation with and under the supervision of Dooars Tea Co. Ltd., who would continue to be the owners thereof. Clause 24 of the said agreement also provided that, in the event the sale was not effected or the agreement was rescinded, the purchaser would be entitled to the expenses incurred in running the tea estate and the vendor-company would be entitled to the sale proceeds of the tea. Possession and management had been handed over to the assessee from the date of the agreement. The conveyance deed was executed on August 12, 1976. The assessee maintained a separate account for the period which was not returned as its income. The assessee, however, returned the income relating to the period subsequent to August 12, 1976.
(3.) The Income-tax Officer, while making the assessment, did not include the income from the tea estate from January 1, 1976, to August 11, 1976. But the Commissioner of Income-tax (Appeals), while deciding ex parte the appeal preferred by the assessee on other points, set aside the assessment and directed the Income-tax Officer to assess the surplus over the expenditure in respect of Messrs. Dooars Tea Co. Ltd. for the whole year.;