TMI Blog1987 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ement stipulated, would be determined at the market value in accordance with the provisions of section 7A(4) of the Electricity Act. " On account payment " was provided for by the agreement. The assessee received from the Board a sum of Rs. 4,43,134 as an " on account " payment and this was mentioned in its directors' report to the shareholders for the year ending March 31, 1967. On September 9, 1970, the assessee wrote to the Board stating that it was claiming Rs. 20,44,887 for the Wardha undertaking. As against the offer of the Board for Rs. 16,79,399, it offered to accept the sum of Rs. 18,62,143, i.e., it offered to split the difference. Adding 20 per cent. solatium to this sum of Rs. 18,62,143, the amount payable was Rs 22,34,572. By its letter dated September 9, 1970, the Board informed the assessee that it was agreeable to so split the difference on the fulfilment of certain conditions with which we are not here concerned. The letter recorded that a sum of Rs. 15,58,458,61 would be the balance payable by the Board to the assessee, taking into account the " on account " payment made and the amounts transferable to the Board under the provisions of law. In making the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal's judgment are referred to us: " 1. Whether, on the facts and in the circumstances of the case, it was the business of the Wardha undertaking of the assessee that was taken over by the Maharashtra State Electricity Board as a going concern for the consideration of Rs. 22,34,572 ? 2. Whether, on the facts and in the circumstances of the case, the property which was transferred from the assessee to the Maharashtra State Electricity Board consisted of the assets mentioned in the agreement dated May 22, 1967, between the said two parties in relation to which the consideration of Rs. 22,34,572 ultimately became payable ? 3. Whether, on the facts and in the circumstances of the case, the sum of Rs. 3,22,429 being 'solatium ' which is the amount equal to 20 per cent. of the valuation of the assets is includible in the sale price for the purpose of determining the taxable capital gain ? 4. Whether, on the facts and in the circumstances of the case, any capital gains from the delivery of possession of movable assets on March 11, 1967/March 12, 1967, are taxable in the assessment year 1967-68 ? " It is not disputed by counsel that the answer to be given to the third quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Ghate pointed out that the expression "undertaking" had been given the meaning of "going concern with all its rights, liabilities and assets as distinct from the various rights and assets which composed it" by the Supreme Court in Rustom Cavasjee Cooper v. Union of India [1970] 40 Comp Cas 325 (SC). Mr. Ghate relied upon the judgment of the Supreme Court in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299 (SC). This was a case in which a firm, which carried on the business of buying land, developing it and then selling it, sold the business pursuant to an agreement, as going concern, with its goodwill and stock-in-trade, to a company promoted by the partners of the firm, the company undertaking to discharge all debts and liabilities. The consideration was of the amount of Rs. 34,99,300 and the schedule to the agreement indicated how it was arrived at. The schedule set out the value of the land, goodwill, motorcars and lorries, furniture, fixtures, etc. The Tribunal held that the sum of Rs. 2,50,000, although shown as the value of the goodwill, was really the excess value of the land, which was the stock-in-trade, and that although the sale was that of the business as a goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any business, profession or vocation carried on by the assessee. Sub-section (2) stated that such profits or gains would be computed after making certain allowances referred to in clauses (i) to (xv) Clause (vii) related to an allowance in respect of any building, machinery or plant which had been sold, discarded, demolished or destroyed, the allowance being the amount by which the written down value thereof exceeded the amount by which the building, machinery or plant was actually sold or its scrap value. It was not disputed before the Supreme Court that if there was a sale within the meaning of clause the amount would be taxable in the hands of the assessee as profits of the previous year within the meaning of that clause. The Supreme Court noted the provisions of the Electricity Act and the rules made thereunder. It stated that if the provisions of the Electricity Act were read along with the rules made thereunder, it became manifest that the condition as to the option of purchase, either by the local authority or the Government, was the result of an agreement between the licensee and the Government. Section 7 was merely an enabling provision which allowed the parties to spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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