TMI Blog1958 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... agent of several allied transport companies. In November, 1945, the assessee had on hand 15 lorries, six taxis and four delivery vans. At that time there was before the business world a scheme sponsored by the Central and State Governments to co-ordinate road and rail transport. In furtherance of this scheme a company called the Southern Roadways Ltd. was floated. It was incorporated on 13th September, 1946, and it obtained the certificate of commencement of business on 15th September, 1946. The assessee was the managing agent of the Southern Roadways Ltd. In November, 1946, the assessee sold its entire fleet of 15 lorries, six taxis and four vans to the Southern Roadways Ltd. for a sum of ₹ 2,20,250. Subsequently, that is to say, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oints of law: 1. Whether the provisions of section 12B of the Indian Income-tax Act levying a tax on capital gains are beyond the competence of the Central Legislature under the Government of India Act, 1935? and 2. Whether on the facts and circumstances of the case, there is material to support the assessment made on the petitioner on a sum of ₹ 1,16,598--as capital gains and whether such assessment is valid? The assessee in R.C. No. 92 of 1953 is the P.S.S. Motor Service Ltd., Madurai, a private limited company now under liquidation. It carried on the business of road transport in passengers and goods in the districts of Madurai and Ramanathapuram. This company had 22 buses with route rights which it conveyed to the South ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1957, this court held on the first question thus: The first of these questions is concluded by the decision of the Supreme Court in Navinchandra Mafatlal v. Commissioner of Income-tax [1954] 26 I.T.R. 758. That question is answered in the negative and in favour of the Department. In view of certain other contentions which had been raised, this court directed the Tribunal to submit a further statement of the case and give its findings as to the market value of the motor vehicles which had been transferred by T.V. Sundaram Ayyangar and Sons Ltd. and P.S.S. Motor Service Ltd. to the Southern Roadways Ltd. The Tribunal has accordingly submitted its findings and further statement. The Tribunal found that the value of the assets trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Southern Roadways Ltd. for amounts very much smaller than the price at which the assets had been sold. Basing himself on this fact Mr. Subbaraya Aiyar contended that it was open to the parties to a contract to vary it or substitute a fresh contract in its place. That is no doubt so, but we find it difficult to see how that argument would help the assessees now before us. In order that section 12B of the Income-tax Act may apply, it is sufficient if in the relevant accounting year profits arise out of the sale of capital assets. What the parties did subsequent to the year will not have any bearing on their liability to tax in respect of that year. Mr. Subbaraya Aiyar next argued that capital gains can be subject to tax only after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s section 8 is concerned. Interest on securities only becomes income when it is actually received and not when it is due or capable of being received by the assessee. Similarly it was held in the latter case: On the interest which accrues due in respect of securities, debentures etc., referred to in section 8 of the Indian Income-tax Act, 1922, the liability to pay tax arises only when the interest is received. Section 12B, however, does not speak of any receipt at all. The crucial word used there is arising. Neither of these decisions, therefore, applies. Section 12B renders liable to tax the profits that have arisen to an assessee by the sale of his capital assets. There is no controversy here that the assets transferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year. The assessees, therefore, obtained the right to receive the price in that year. Their profits, therefore, arose in that year. As we tried to explain before, the section does not require that the profits should have been received. It is sufficient if they have arisen. In this connection we would mention that the assessees maintained their books on a mercantile basis and showed the sale price of their assets as receipts. In this context the observations of the Privy Council in Commissioner of Income-tax v. Kameshwar Singh [1933] 1 I.T.R. 94 are of interest. At page 101 their Lordships say: What the officer is directed to compute is not the assessee's receipts but the assessee's income and in dubio what the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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