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TMI Blog2009 (3) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 of the Income-tax Act, 1961 (for short, "the Act"), on January 2, 1978. The assessee filed return on February 14, 1978. The assessment was reopened as, according to the Income-tax Officer, the assessee did not disclose true facts of its income. The assessee-company claimed loss of Rs. 48,510 on sale of shares of M/s. Baranagore Jute Factory and M/s. Equitable Coal Co. which was allowed in the original assessment. These shares had come to the assessee on account of amalgamation of two companies with it, namely, M/s. Sri Vijay Laxmi Trading Co. and M/s. Eastern Trading Syndicate (P.) Ltd. The amalgamated company, M/s. Eastern Trading Com-pany, held 300 shares of M/s. Baranagore Jute Co. Ltd. which were taken over for Rs. 54,450 at Rs. 181.50 per share, which the assessee sold in the market for Rs. 21,000 and thus claimed loss of Rs. 33,450 whereas the assessee paid only a sum of Rs. 33,333 for its entire acquired assets worth Rs. 1,39,330. According to the Revenue, the cost of each share comes to Rs.43.42 and, therefore, the cost of 300 shares works out to Rs. 13,026 only and the sale price being Rs. 21,000, there was profit of Rs. 7,974 instead of loss of Rs. 33,450 which was wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue and Shri A. Kasliwal, learned counsel for the assessee and perused the impugned orders. 6. Shri J. K. Singhi, learned counsel appearing for the Revenue has argued that the Commissioner of Income-tax (Appeals) has erroneously relied on the judgment of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299, which is based on different factual aspect as in that case it was the difference between the purchase consideration and the value of assets purchased, which was taxed, whereas in the present case, it is the subsequent sale of assets which forms the basis for levy of tax. Admittedly, the assessee itself cannot deny the value of assets calculated by it as it is only after calculating the value of assets that the amount of purchase consideration would have been arrived at by the assessee. Thus, the assessee cannot blow hot and cold at the same time adopting a lower value for the purpose of calculating purchase consideration and a higher value for showing loss in its books. Learned counsel for the Revenue submitted that the judgment of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 therefore does not apply to the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Bombay High Court in Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193 and the judgment of the Calcutta High Court in East India Electric Supply and Traction Co. Ltd. v. CIT [2003] 263 ITR 243. 9. In order to examine the correctness of the impugned orders, we have to go back to the ratio of the judgment of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 to find out in the first place whether the same is applicable to the facts of the present case and, secondly, to ascertain whether the view then expressed by the Supreme Court still holds good. 10. In Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 the respondent Mugneeram Bangur and Co. (vendors) was carrying on the business of land development in Calcutta. By an agreement dated July 7, 1948, the partners of the firm agreed to sell all the business of the said firm to the Amalgamated Development Limited (vendee) which company was promoted by the partners of the firm. As per the agreement, 17,500 redeemable preference shares of Rs. 100 each and 17,493 ordinary shares of Rs. 100 each were agreed to be given by the vendee company to the vendor in full satisfaction of the purchase price of Rs. 34,99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing having been sold at a slump price and no amount being attributable to depreciable and non-depreciable assets, the decision of the Income-tax Officer was a mistake apparent from the record, which was required to be corrected. It would be evident from both the aforesaid cases that the transaction of sale was between the amalgamated company and the acquiring company whereas in the present case, the sale of shares in the present case has taken place at a secondary stage much subsequent to amalgamation of the two companies with the assessee-company which had acquired the shares. What is in question is the method of arriving at the value of the share price at which they were taken over by the assessee as against their book value in the hands of amalgamated com-panies and their selling price. 12. The Supreme Court in B. M. Kharwar's case [1969] 72 ITR 603 dealing with a case where the assessee carrying on the business of purchasing and selling cloth, closed its manufacturing side of the business and transferred its machinery to a private limited company in the share capital of which, the partners of the firm had shares and interest as they had in the assets and profits of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax under section 10(2)(vii), proviso (ii) of the 1922 Act (section 41(2) of the 1961 Act). In those facts, the Supreme Court found that it was very difficult to attribute part of the slump price to the cost of the land sold in the realisation sale since there was no evidence that any attempt was made to evaluate the land on the date of the sale. The Supreme Court, therefore, did not accept the plea of the assessee similar to the one raised before us and held that it was an admitted case of the assessee even before the Income-tax Officer that the purchase consideration of plant and machinery and dead stock as per the assessee's books came to Rs. 11,50,400 whereas the valuation thereof as per the revaluation made by the valuer came to Rs.15,87,296. The written down value of the plant and machinery and the dead stock being the difference of the above two was thus Rs. 4,36,896. It was held that this is not a case in which it can be said that the price attributed to the items transferred is not indicated and hence section 41(2) of the Act of 1961 cannot be applied. The view to the contrary expressed by the High Court was reversed and the question was accordingly answered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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