NIRANJAN LAL RAM CHANDRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question whether on the facts and circumstances of the case the profits of Rs. 2,994 and Rs. 2,997 could be taxed under section 10(2)(vii) of the Income-tax Act ? has been referred to this court for its opinion by the Income-tax Appellate Tribunal, Allahabad Bench, under section 66(1) of the Income-tax Act in the following circumstances :

(2.) THIS was the proviso as it stood in the assessment year; it was amended in 1949, and the words whether during the continuance of the business or after the cessation thereof were added after the words is sold, but we are not concerned with them. The difference between the original cost and the written down values of the two trucks are not known but they are admittedly greater than Rs. 2,994 and Rs. 2,997 respectively; in other words, the excess in respect of neither of the trucks exceeds the difference between the original costs and the written down value and consequently the whole of the excess in each case would be deemed to be the profit of the previous year relevant to the assessment year 1947-48, provided that his proviso was applicable. The assessee had made a profit from its business of hiring out trucks and the total profit including the sum of Rs. 5,991 came to Rs. 12,848. The Income-tax Officer assessed it on the whole of this amount, applying the provision of section 10(2)(vii) read with the second proviso. He rejected the assessees contention that the second proviso was inapplicable because the trucks were sold on the very first day of the previous year and, therefore, could not be said to have been used during the previous year for the purposes of the business within the meaning of section 10(2)(iv), (v) and (vi). The assessee preferred an appeal which was dismissed by the Appellate Assistant Commissioner, who held that the second proviso as it stood prior to its amendment in 1949, governed the case. The assessee preferred a second appeal to the Appellate Tribunal on the only ground that the trucks having been sold on the first day of the previous year could not be said to have been used during the previous year for the purposes of the transport business and that consequently section 10(2)(vii) did not govern the case at all. The Tribunal dismissed the appeal holding that the mere fact that the trucks were sold on the first day did not necessarily mean that they were not kept available for use on that day and that used within the meaning of section 10(2)(iv), (v) and (vi) includes passive use also. Then at the instance of the assessee the Tribunal referred the question for the opinion of this court.

(3.) THE words used for the purposes of business came in for discussion before the Supreme Court in Liquidators of Pursa Ltd. v. Commissioner of Income-tax and Das J. observed at page 272 :