TMI Blog1979 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/76, 106/76, 107/76, 108/76 and 109/76. Though the seven cases relate to different periods, the controversy arising out of them is common. The parties are the same and the facts are also similar. The Income-tax Appellate Tribunal refused to draw up the statement of the case and hence the above applications. The assessment years in question are 1961-62, 1962-63, 1963-64, 1964-65, 1965-66, 1968-69 and 1969-70 and the corresponding previous years are calendar years 1960, 1961, 1962, 1963, 1964, 1967 and 1968. The brief facts necessary for appreciating the controversy in the above cases are these: The erstwhile Maharaja of Gwalior was carrying on the business of banking in the name and style of Krishnaram Baldeo Bank. The assessee-Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Income-tax Appellate Tribunal found that the book value thus shown was not inflated and was shown correctly. When the securities were sold year after year, an income was made by the assessee-bank and this income, according to the assessee, was the sale price minus the book value at which the securities bad been purchased. The Department does not agree with this contention. According to the Department, since the assets of the Maharaja were transferred at a low price and a saving was made at that stage, this saving should be proportionately added to the sale price of the securities. The assessee made the following sales of the securities: Rs. For the 1st year 31,26,413 For the 2nd year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,38,732 For the 3rd year 84,140 For the 4th year 1,33,590 For the 5th year 50,428 For the 6th year 39,842 For the 7th year 23,324 Similarly, for the first year in question the assessee had written off bad debts amounting to Rs. 1,55,728. This included three debts, namely, Rs. 1,51,942 in the account of Rai Bahadur Seth Dunichand and others, Rs. 3,498 in the account of Shri Kamal Narain and Rs. 288 in sundry accounts. The ITO did not dispute the claim that the debts were trade debts. He, however, disallowed the amount on the ground that the assessee had made a saving of 22% while taking over the assets and since the bad debts written off were less than 22% of the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises as to whether the Tribunal was justified, in the circumstances of the case, to hold that the company had not effected any saving in acquiring the assets and that the cost of the assets must be taken to be the cost as recorded in the book of the business, first when it was owned by the Maharaja of Gwalior, and later when it was transferred to the company. Shri N. C. Jain, learned counsel appearing on behalf of the Department, contends that the value of securities sold by the assessee-company were, in effect, acquired by the assessee-company at a cheaper rate. The saving of 22% of the book value of the securities must, therefore, be added as income of the assessee. It was permissible in law to allot shares for considerations other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so divided equally between the two companies for cash at par. The Socony Vacuum Oil Company was allotted bonds of the value of $ 13,093,000. The bonds were redeemable and had been redeemed subsequently. The net profits earned by the assessee-company year after year subject to certain appropriations were shown in the balance-sheet under the caption " earned surplus " or " earnings reinvested ". The ITO disallowed the claim of the assessee-company for an inclusion of the account capital paid in surplus and earned surplus, in the computation of the taxable capital under Sch. II, r. 2(1), of the Business Profits Tax Act. The excess of the net value of the assets so transferred over the par value of stock issued and the serial bonds were entered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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