TMI Blog1967 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... on was paid by the issue of shares to the vendor or its nominees in the share capital of the respondent-company. The assets included land at cost, Rs. 12,68,268 as also goodwill and certain other assets subject to certain liabilities incurred by the firm. By the time the respondent-company tookover the land, the firm had sold a number of plots in respect of which part of the consideration money had been realised and for the balance mortgage bonds had been executed by the purchaser. In respect of those plots there was an undertaking to lay out roads etc. The respondent-company took over the debts as well as the liabilities. After the purchase, the respondent-company itself sold certain other plots. The purchaser paid a percentage of the price in cash and undertook to pay the balance with interest at a specified rate in annual instalments which was secured by creating a charge on the land purchased. The sales made by the respondent-company were in all material respects similar to the sales made by the firm. A specimen copy of the sale deeds executed by the firm or the respondent company is annexure "A" to the statement of the case. The relevant provisions of the sale deed are as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 5,800 owing by the said mortgagor to the said mortgagee should be secured by an indenture of security deed of even date being these presents to be executed by the said mortgagor in favour of the said mortgagee immediately after the execution of conveyance now in recital. Now this indenture witnesseth and declares as follows? (1) In consideration of the said premises the said mortgagor doth hereby covenant with the said mortgagee that the said mortgagor will pay to the said mortgagee the said sum of Rs. 5,800 within ten years to be computed from the date of these presents together with interest thereon at the rate of 8% per annum calculated from the date of these presents up to the date of payment payable monthly . ." We are concerned in this case with the assessment of the respondent company for two periods. The first period is the accounting year ending June 30, 1949, corresponding to the assessment year 1950-51 and the second period is the accounting year ending June 30, 1950, corresponding to assessment year 1951-52. For the assessment year 1950-51, the respondent-company was maintaining its accounts in the mercantile system. According to this system, the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the lands actually sold by the respondent-company but disallowed the amount of Rs. 87,517 being the expenses incurred in respect of the lands already sold by the firm when the respondent-company took over. Against the orders of the Income-tax Officer the respondent-company preferred appeals to the Appellate Assistant Commissioner who dismissed the appeals by a consolidated order dated November 7, 1956. The respondent-company thereafter took the matter in appeal before the Appellate Tribunal. The view taken by the Appellate Tribunal was that the Income-tax Officer should have made the assessment on the basis of cash system for the year 1951-52 and for that year only the cash receipts and disbursements should be considered. With regard to the question of unrealised consideration money, the Appellate Tribunal held that for both the assessment years the unrealised consideration should be treated as income. With regard to expenses incurred, the Appellate Tribunal upheld the finding of the Income-tax Officer. In other words, for both the assessment years it was held that the expenses incurred in respect of lands already sold before the respondent-company took over should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the purchasers would be able to pay by instalments spread over a number of years. At the time the respondent-company took over the lands, a portion thereof had already been sold by the firm but the development had not been completed and in the sale deeds entered into by the respondent-company with the subsequent purchasers the respondent-company expressly undertook the liability to complete the development within a reasonable time. The argument that the respondent-company had nothing to do with the lands already sold which did not form part of its stock-in-trade is not correct. In the present case, the development of the entire land is an integrated process and cannot be sub-divided into water-tight compartments as the making of the roads and the provision for drainage and street lighting etc. cannot be related to any particular piece of land but the development has to be made as a whole as a complete and unified scheme. It is a case of commercial expediency and as pointed out by this court in Eastern Investments Ltd. v. Commissioner of Income-tax: "A sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangur Co. (Land Department), and to the terms of the sale deed dated July 7, 1948, and the schedule thereto and argued that there was no quantification of the obligations taken over by the respondent-company under clause 5 of the sale deed. It was stated by Mr. Asoke Sen that the obligations were not computed and did not form part of the consideration of Rs. 34 lakhs and odd arrived at in the schedule. In our opinion, there is justification in the argument put forward by Mr. Asoke Sen and the principle of the decision in Royal Insurance Company v. Watson has no application to the present case. There is nothing to show in the present case that the obligation incurred under clause 5 of the sale deed was quantified and formed part of the consideration amounting to Rs. 34 lakhs and odd mentioned in the sale deed as paid by the respondent-company. We, accordingly, reject the argument put forward by Mr. Mitra on behalf of the appellants on this aspect of the case. We next proceed to consider the question whether the full price as recited in the sale deed should be regarded as having been realised by the respondent-company for the relevant accounting years and not merely the actual ..... 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