TMI Blog1953 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation of this company the business concerns that were amalgamated handed over to the company their vehicles as well as their route permits. In lieu of these vehicles, they were allotted fully paid-up shares. Some of these vehicles, which had been purchased from the shareholders for sum of ₹ 89,731 were sold for ₹ 53,650 in the following year. For the assessment year 1945- 46, the assessee company claimed the benefit of this loss of ₹ 36,081 under Section 10(2)(vii) of the Income-tax Act. At the same time, it claimed depreciation on the cost of vehicles, which were in business used and which, according to the company, was ₹ 5,73,211. Out of this sum ₹ 1,66,968 represents the cost of vehicles purchased from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer determined, by some method, which we need not here critically examine, the true value of the vehicles and proceeded on that basis. The assessee company applied to the Income-tax Appellate Tribunal for referring the question of law arising in their case under Section 66(1) and the following is the question referred by the Appellate Tribunal:- Whether, in the circumstances of the case, the Income-tax authorities were justified in law in going behind the contract of sale in determining the written down value, (i.e., the original cost to the assessee) for the purposes of making an allowance under clauses (vi) and (vii) of Section 10(2) of the Income-tax Act? Learned counsel for the assessee company quotes some authorities, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or allotment of shares as adequate its estimate cannot be critically examined. The second case, Craddok v. Zevo Finance Co. Ltd. [1944] 1 All E.R. 566, also contains words to a similar effect. In Osborne v. Steel Barrel Co. Ltd. [1942] 1 All E.R. 634, it is stated that the issue of shares at discount is illegal but it is pointed out that in law such issue must be based on an honest estimate of the value of the assets transferred by the person concerned. It cannot reasonable be argued that even if the persons is charge of the company do not act bona fide the Income-tax authorities are bound by the transactions of transfer of shares. If this proposition were accepted the Income-tax Act could be very easily defeated. Any persons may form th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect, the Income-tax authorities can go behind the apparent transaction. In that case they can only determine the written down value by coming to a conclusion as to the true value of the property transferred. In the present case, unluckily for the assessee company, there is a finding that the value of the vehicles has been inflated. In the statement of the case the words used are that there has been an artificial inflation in the book value of the assets . Although these exact words are not used in the appellate order of the Tribunal by which the case was disposed of, the words unduly inflated do appear therein. We assume these words to mean that there was a deliberate inflation. The Tribunal had agreed with the Appellate Assistant Com ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
