TMI Blog1967 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... vice " hereinafter called " the service ". On May 31, 1955, the business was transferred to the Morning Star Bus Service (Private) Ltd. hereinafter called " the company ". The assets transferred by the service to the company consisted of seven motor buses and a workshop, and the consideration for the transfer as entered in the profit and loss account of the service was Rs. 74,000. The written down value of the seven motor buses in the books of account of the service was Rs. 24,302. In a proceeding for assessment to tax in the year 1956-57 the Income-tax Officer held that out of the consideration of Rs. 74,000, Rs. 4,000 should be allocated to the workshop assets (in respect of which no depreciation had been previously allowed), and the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so (to section 10(2)(vii) ) brings to charge is the profit that a vendor makes from a vendee as the result of a sale. If no sale or profit in any commercial sense occurs because of the virtual identity of the vendor and the vendee, as in the case before us, it cannot be said that the second proviso is attracted and that a tax liability does arise." The Commissioner of Income-tax has appealed to this court, with special leave. Counsel for the Commissioner contended that a company is in law a legal entity distinct from the shareholders who have interest in its business and the transaction under which a company formed by the persons interested in the business to take over that business, is of the nature of sale when in lieu of the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r observed in paragraph 3 of his judgment that the value of the motor buses transferred was Rs. 70,000. In his view whatever may be the reasons for transfer of the business, the purchase price entered by the company had to be taken into account in applying the second proviso to section 10(2)(vii). The Tribunal did not attempt to ascertain the true nature of the transaction, but assumed that there was no sale of the assets of the society to the company, because " in identical circumstances " the High Court of Bombay had held that there was no sale. A transaction by which a person carrying on business transfers the assets of that business to another assessable entity may take different forms and may have different legal effect. The assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the facts and to ascertain in which of the different categories a transaction falls. The Tribunal cannot admit a transaction which has distinct characteristics to exemption from tax liability on the broad ground that the substance of the transaction was to readjust the position of the transferor as holder of the assets transferred. The facts on the basis of which the question may be answered have not been clearly found by the Tribunal. It is true that in the profit and loss account of the service, the motor buses transferred to the company were valued at Rs. 70,000 and the same value was entered in the books of account of the company. It appears from the statement made by the Appellate Assistant Commissioner that the shares of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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