TMI Blog1989 (10) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the sale, the assessee had incurred expenditure in an aggregate sum of Rs. 1,60,661, the predominant part whereof was for registration and stamp fees in the sum of Rs. 1,29,425 and solicitors' fees in the sum of Rs. 28,926. The expenditure was proportionately allocated by the assessee to the various assets. In doing so, a sum of Rs. 1,15,267 was allocated to the factory building and Rs. 474 to the lift. The sale price in respect of the factory building and the lift was less than the cost thereof so that there was no capital gain. However, having regard to section 41(2) of the Income-tax Act, 1961, the difference between the price realised for the factory building and the lift and their written down value was required to be includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rniture and fittings, under section 70(2)(ii) of the Income-tax Act, 1961?" Section 41(2) reads thus : "41(2) Where any building, machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business or profession is sold, discarded, demolished or destroyed and the moneys payable in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceed the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business or profession of the previous year in which the moneys payable for the building, machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no other purpose. It could not be extended so as to permit deduction of expenses incurred in the business. The court noted that the expenses involved in Akola Electric Supply Co. Pvt. Ltd.'s case [1978] 113 ITR 265 (Bom) did not pertain to amounts expended for obtaining the sale price which was to be taxed under the fiction but were expenses by way of establishment expenses, salaries and allowances. The assessee before the court in Bharat Lines Ltd.'s case [1986] 159 ITR 541 (Bom) was not claiming to set off expenses of that type. The brokerage and travelling expenses which it was claiming to set off against the balancing charge realised by the sale of the ships were directly referable to and related to the sale. The court observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, to the judgment of the Supreme Court in CIT v. Bipinchandra Maganlal and Co. Ltd. [1961] 41 ITR 290. The judgment sets out the reason for the introduction of the self-same fiction in section 10(2)(vii), second proviso, of the Indian Income-tax Act, 1922. The Supreme Court said that where, in the previous years, by reason of depreciation allowance, taxable income had been reduced and, ultimately, the concerned assets had been sold for an amount exceeding the written down value, i.e., the original cost less depreciation allowance, the Revenue was justified in taking back what it had allowed against wear and tear because , in fact, depreciation had not resulted. It is difficult to see how this statement of the reasons for the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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