MOTOR HOUSE GUJARAT LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ON a requisition made by this Court, the Tribunal has drawn up the statement of the case and referred to us the following question of law :

(2.) WE are here concerned with the asst. year 1951 -52, the relevant account year for which is the calendar year 1950. The assessee is an incorporated company under the Indian Companies Act and was incorporated in the year 1927. It had been carrying on business of assembling cars and trucks and was also dealing in cars, trucks, etc. For the purpose of its business, it acquired extensive lands in the year 1946. The assessee thereafter constructed buildings, workshops and installed machinery therein, etc. It appears that in the year 1948, another company also was incorporated for doing similar business. In about October, 1949, an agreement took place between that company and the assessee -company, whereunder the assessee -company agreed to sell and the other company agreed to buy all lands, constructions, buildings, plants, etc., from the assessee - company for a consideration of Rs. 35 lakhs -8 lakhs being the value of movables and 27 lakhs being the value of lands, buildings, and rights, etc. Though the agreement for sale was made in October, 1949, the possession was actually given to the purchaser on 17th Feb., 1950, and till then the company continued to run its business using the aforesaid property.

(3.) UNDER the provisions of this proviso thus, profits determined would be sale price minus written down value but not exceeding original cost minus written down value. Consequently, it follows that larger the written down value the smaller will be the margin of profits. The written down value is defined in Sub -S. (5) of S. 10 of the Act. Clause (a) deals with the written down value of assets acquired before the previous year and cl. (b) relates to cases of assets acquired before the previous year. As the assessee company had been running the business for some time, we are concerned with cl. (b), and it is in the following terms :