TMI Blog1971 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... y had sold the Crown Flour Mills to the Hindustan Cold Stores and Refrigeration Ltd. within the meaning of section 10(2)(vii) of the Income-tax Act, 1922, and was entitled to the deduction of the loss of Rs. 3,58,783 under that section ? The matter relates to the assessment year 1957-58, the relevant accounting year ending on September 30, 1957. The assessee-company Meatles Private Ltd., had been carrying on two distinct businesses, viz , (1) the business of speculation in shares and other commodities, and (2) the business of flour milling in its factory known as Crown Flour Mills. Since a number of years, the losses in its speculation business were wiping out the profits earned in its milling business. The assessee-company, therefore, decided to transfer the Crown Flour Mills to its subsidiary company, the Hindustan Cold Stores and Refrigeration Ltd. A resolution was passed by the assessee-company on February 1, 1957, approving two draft agreements relating to the sale of the Crown Flour Mills and its stock-in-trade, etc., to the said subsidiary company in consideration of Rs. 8,75,000 and Rs. 3,75,063-12-10 respectively. The consideration for the sale of the mill was resolved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares was given to the Registrar of Companies on the same date. The date of the execution of the sale deed was put off by the subsidiary company as it was not in a position at that time to provide money for the purchase of the necessary stamp papers for the sale deed, the stamp duty having risen from Rs. 15,000 to Rs. 75,000 in the meanwhile. The sale deed, however, was not executed till September 9, 1963, the date of the decision of the Income-tax Tribunal. The sale of the Crown Flour Mills by the assessee-company was at Rs. 3,58,783 below its written down value. Allowance in respect of this loss was claimed to the extent of the said amount under section 10(2)(vii) of the Act. This claim was disallowed by the Income-tax Officer on the ground that the business of the Crown Flour Mills was still to be considered the business of the assessee-company as before, as no registered sale deed had been executed. The assessee-company had not disclosed any income from the Crown Flour Mills in the assessment year 1957-58 on the ground that it had sold the mills to the subsidiary company, which had actually earned the income therefrom. The subsidiary company had shown an income of Rs. 94,023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills had been sold. On behalf of the assessee it was contended that this would amount to adding a new and different question which was not within the jurisdiction of this court. The view of the Tribunal about the inclusive nature of the question was also assailed and was said to be not binding on this court. The request for reframing of the question was, therefore, opposed. The power of this court to reframe a question and to call for a supplementary case, if necessary, cannot be doubted, although a new and different question may not be added. The Bench was of the opinion that the true scope of the reference was to determine whether or not the Crown Flour Mills was sold by the assessee-company and this question of sale was well within the framework of the question as referred. The question was, therefore, refrained, as mentioned earlier, in the words already reproduced. It is, therefore, necessary first to find out, what is meant by the word " sold ", as occurring in section 10(2)(vii) of the Act, which reads as follows : " in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that there, could be a sale only when it resulted in the passing of property. " Sale ", under section 54 of the Transfer of Property Act, 1882, is a transfer of ownership, in exchange for a price paid or promised or part paid or part promised. Such transfer in the case of tangible immovable property of the value of one hundred rupees and upwards can be made only by a registered instrument. The contract of sale of immovable property, it has been specifically provided in that section, does not of itself create any interest in or charge on the said property. Now the Transfer of Property Act has been on the statute book since 1882 ; and the word " sale ", in respect of immovable property of the value of rupees one hundred and upwards, has come to convey the idea of transfer of ownership for a price by means of a registered instrument. The word " sale ", therefore, had become a word of well recognised legal import, at the time when it was introduced in the Act; and in that sense, sale could be made only by a registered instrument, in the case of immovable property of the value of one hundred rupees and upwards. It is, therefore, not possible to give it any other meaning. Alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be said to have been effected unless a registered sale deed was executed. The word " sale ", as occurring in section 12B of the Act, came up for consideration before a Bench of the Calcutta High Court, consisting of G. K. Mitter and A. N. Ray JJ., as their Lordships then were, in Hall and Anderson (Private) Ltd. v. Commissioner of Income-tax . It was observed in that case : " As already pointed out the word 'sale' has not been defined in the Indian Income-tax Act and in order, therefore, to find out the legal implication of a ' sale' we must resort to the Transfer of Property Act in the case of immovable property and to the Sale of Goods Act for movable property. In so far as fixtures are concerned the position is covered by section 8 of the Transfer of Property Act. Even though the assessee has parted with the immovable property to all intents and purposes as from December 1, 1946, in law the ownership continued in it until February 26, 1949. The sale of immovable property was held, in that case, to have been effected on February 26, 1949, when the sale deed was executed. In Rajendra Mining Syndicate v. Commissioner of Income-tax, a Bench of Andhra Pradesh High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectric Supply Corporation Ltd. v. Commissioner of Income-tax. But that case has no relevance for the present purpose, as that was a case of the Government requisitioning a plant. The transaction was held not to be a sale which ordinarily meant a transaction entered into voluntarily between two persons. The learned counsel then relied on Associated Clothiers Ltd. v. Commissioner of Income-tax, where the appellant-company had sold the property for a stated consideration, which was in excess of the original cost. The difference was held to be profit within the meaning of the second proviso to section 10(2)(vii) of the Act. No deed of conveyance was executed. But, the Supreme Court accepted the statement made by the Tribunal in the statement of case, where there was a clear recital that all the assets and liabilities of the appellant-company were transferred to the other company. At what stage and how this transfer took place, is not clear from the report. This case, therefore, affords no assistance to Mr. Karkhanis. In the result, it cannot be said that the assessee-company has sold the Crown Flour Mills to the subsidiary company within the meaning of section 10(2 )(vii) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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