TMI Blog1998 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... uns in the name and style of V. R. Sambasiva Iyer and Sons was transferred by him to Mir Mohammed Ali ?" The assessee is an individual. He sold his proprietorship business styled as V. R. Sambasiva Aiyar and Company as a going concern to one Shri Mir Mohammed Ali for a consideration of Rs. 36,000. The Tribunal referred to the retirement of the assessee from the two partnerships viz., Kamakshi Industries and Southern Engineering Company, due to dispute which arose among the partners. The assessee had received a sum of Rs. 10,000 for taking over his share in Shree Kamakshi Industries and Rs. 8,000 for taking over 5 per cent. of the share which the assessee held in the firm of Southern Engineering Company when both the firms were reconstitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r capital gains of Rs. 1,38,637 in the case of Southern Engineering Company ? The Tribunal noticed that under the agreement dated August 16, 1973, wherein the business was sold as a going concern, the assessee transferred his rights in the industrial unit, viz., K. R. Sundaram Industrial Estate (P.) Ltd., and the rights under the hire purchase agreement with National Small Scale Industries in favour of the buyer. The Tribunal noticed how the Income-tax Officer arrived at the amounts of profits under section 41(2) and the capital gains. The Income-tax Officer had noticed the value of the assets as per the balance sheet was Rs. 1,11,746 and he granted deduction of the same from the total value of the liability amounting to Rs. 4,34,505 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal. The Tribunal was of the view that the decision of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299, was applicable to the facts of the case. The Tribunal, in the view it had taken should have examined the question further whether any part of the consideration was attributable to the assets sold by the assessee. The Tribunal unfortunately has not determined that question at all. Secondly, the Income-tax Officer found that even though under the agreement, it is stated that a sum of Rs. 36,000 was the consideration, the buyer took over the liability amounting to Rs. 3,31,759, as a part of consideration. The Tribunal did not give due attention to the fact that it was the figure arrived at by the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41(2) of the Act, the profit or gain arising on the transfer of the assets would be assessable under capital gains. The Tribunal, therefore, in our opinion, erred in applying the principles laid down in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 (SC), which was a case where the Supreme Court was dealing with the determination of profit arising under capital gains when the entire proprietary concern of the assessee was transferred. The Supreme Court subsequently in CIT v. Artex Manufacturing Co. [1997] 227 ITR 260 explained the decision in mugneeram Bangur and Co.'s case [1965] 57 ITR 299 (SC), and held that even in the case of a realisation sale, the excess amount realised over the written down value on the sale of the asset, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for the transfer and whether it is possible to attribute the sale consideration to any of the assets transferred attracting the provisions of section 41(2) of the Act and if section 41(2) is not attracted, whether there is any liability arising under capital gains. Since the Tribunal has not applied the proper tests in cancelling the assessment, we direct the Appellate Tribunal to consider the question de novo in the light of the observations made by us. Accordingly, we answer the question of law referred to us in the affirmative, in favour of the Department and against the assessee, subject to the direction that the Tribunal should go into the question once again and determine the liability to tax. As there was no represen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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