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TMI Blog1967 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of plying lorries under the name and style of " Chamundi Meenakshi Transport " till the end of the calendar year 1960. Her accounting year was also the calendar year. During the calendar year 1961, she wound up her business, sold the three lorries which she possessed as well as all other business assets, goodwill, etc. By way of sale of the three lorries, she received a total consideration of Rs. 87,000. During the preceding years she had been allowed depreciation on these lorries in the course of computation of her business income. The total depreciation so allowed, up to the end of the calendar year 1960, was Rs. 41,075. This amount was added to her other income during the calendar year 1961 by the Income-tax Officer and subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation of the asset by sale or otherwise in respect of which the depreciation had already been allowed by way of deduction. The old proviso to section 10(2)(vii) of the Act of 1922, dealing with the topic, read as follows : Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place." The first paragraph of sub-section (2) of section 41 of the Act of 1961, which is the main provision, reads as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation to sub-section (1) of section 32 is : " 'moneys payable' in respect of any building, machinery, plant or furniture includes---. . . . (b) where the building, machinery, plant or furniture is sold, the price for which it is sold. " The Income-tax Appellate Tribunal in rejecting the case of the present assessee depended principally on this definition. They took the view that the price for which an article is sold within the meaning of the Explanation to sub-section (1) of section 32 means the gross price and not the net price after deducting brokerage, if any, paid for selling the asset. Before the Tribunal the assessee contended that, though, in fact, she had not carried on any business, the Explanation to sub-section (2) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business income in accordance with the actual facts. Indeed, the two sections, 32 and 41 of the Act of 1961, deal with the two aspects of the same question, viz., the abatement to be allowed in computing business income on account of actual loss suffered by reason of depreciation in assets actually used for business purposes; although the surplus as understood in the section is deemed to be or treated as business income, in actual event it is merely a realisation of a capital asset and, therefore, a capital receipt. What is stated above is in accordance with the principle enunciated by the Supreme Court in Commissioner of Income-tax v. Bipinchandra Maganlal & Co. Ltd. Although that was a case which dealt with the position as under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph of the sub-section, viz., that what is in fact a capital receipt must be regarded as a business, income and be chargeable to income-tax as such. That fiction cannot be given effect to unless both the receipt of the money as well as the business whose income it is regarded to be, came about and existed in the same account year, in respect of which the assessment is made. That result was sought to be achieved by an amendment of the relevant proviso to the old section 10(2)(vii) in 1949 by introducing the expression " is sold, whether during the continuance of the business or after the cessation thereof ", but was held not to have that effect by a pronouncement of the Supreme Court. The present Explanation is obviously intended to m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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