1965 (3) TMI 22 - SC - Income Tax

Whether on the facts and circumstances of this case by the sale of the whole business concern it could be held that there was taxable profit in the sum of ₹ 2,50,000 ?

Held that:- In the case of a concern carrying on the business of buying land, developing it and then selling it, it is easy to distinguish a realisation sale from an ordinary sale, and it is very difficult to attribute part of the slump price to the cost of land sold in the realisation sale. The mere fact that in the schedule the price of land is stated does not lead to the conclusion that part of the slump price is necessarily attributable to the land sold. There is no evidence that any attempt was made to evaluate the land on the date of sale. As the vendors were transferring the concern to a company, constituted by the vendors themselves, no effort would ordinarily have been made to evaluate the land as on the date of sale. What was put in the schedule was the cost price, as it stood in the books of the vendors. Even if the sum of ₹ 2,50,000 attributed to goodwill is added to the cost of land, it is nobody's case that this represented the market value of the land.

Thus the sale was the sale of the whole concern and no part of the slump price is attributable to the cost of land. If this is so, it is clear from the decision of this court in Commissioner of Income-tax v. West Coast Chemicals & Industries Ltd. [1962 (3) TMI 5 - SUPREME Court] that no part of the slump price is taxable. We, therefore, answer question in the negative.