TMI Blog2002 (7) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 26-7-2002 - Judge(s) : M. S. SHAH., K. A. PUJ. JUDGMENT The judgment of the court was delivered by K.A. Put J.-At the instance of the applicant-Revenue, the following question of law is referred to this court for its opinion for the assessment years 1984-85 and 1985-86: "Whether, the Appellate Tribunal is right in law and on facts in holding that the amount of sales tax refund received by the assessee-firm was not to be included in the total income of the assessee under the provisions of section 41(1) nor the provisions of sections 176(3A), 170(1)(b) and 28(iv) are attracted?" In this case, the assessee-company was one of the partners of Saurashtra Packaging Services and that firm stood dissolved with effect from Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income-tax (Appeals) has further placed reliance on the decision of the Income-tax Appellate Tribunal, Allahabad Bench, "A", in the case of New Cawnpore Flour Mills (P.) Ltd. v. ITO [1986] 19 ITD 360, and held that the provisions of section 176(3A), section 170(1)(b) and section 28(iv) are not attracted. Being aggrieved by the said order, appeals were filed by the Revenue before the Tribunal and the Tribunal after remand, has decided the said matter fresh and had taken the view that the amount of sales tax refund received by the assessee-company in the assessment years 1984-85 and 1985 86 were not to be included in the total income of the assessee. In the aforesaid premises, the Revenue has come in reference before thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41(1), namely, the husband, having died, the Revenue could not take advantage of these provisions. The above principle was also reiterated by the later decision of the Supreme Court in the case of Saraswati Industrail Syndicate Ltd. v. CIT [1990] 186 ITR 278, wherein it is held that "in order to attract the provisions of section 41(1) of the Income-tax Act, 1961, the identity of the assessee in the earlier year in which deduction was granted in relation to a trading liability and in the subsequent year in which benefit is derived must be the same. If there is change in the identity of the assessee, there would be no tax liability under section 41. If the assessee to whom the trading liability may have been allowed as a business expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding the value of such benefit or perquisite under the head "Profits and gains of business or profession". The Revenue is, therefore, not justified in taxing the amounts in question by invoking the provisions of section 28(iv) of the Act. As far as the applicability of section 176(3A) is concerned, a plain reading of the section itself makes it clear that the said section is not applicable to the facts of the present case. Section 176(3A) can be applied only when there was discontinuance of business. Here, in the present case, the business was continued even after the same was taken over by the assessee-firm. In such a situation, the provisions of section 176(3A) of the Act cannot be pressed into service. The Revenue is, therefore, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1922 Act, It has been held by the Supreme Court in the case of CIT v. Express Newspapers Ltd. [1964] 53 ITR 250 that both section 26(2) and the proviso thereto dealt with any profits and gains of a business, profession or vocation; they did not provide for the assessment of income under any other head, e.g., capital gains. In an assessment made on the successor under the proviso to section 26(2), capital gains made by the predecessor could not be included, and, therefore, the amount which represented the capital gains of the predecessor on the sale of its machinery could not be brought to tax in the assessment of the successor under section 26(2) of the 1922 Act. Section 170(1)(b) read with the Explanation thereto made a departure from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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