TMI Blog1974 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... .I. (India) and repayment of the loan by transfer of shares in the Alkali Chemical Corporation of India Ltd., Indian Explosives Ltd. and Atic Industries Private Ltd.,. which are associated companies in India of the London company. It is alleged that the difference between the face value of the said shares and the market value of the date of transfer by the I.C.I. (India) Ltd. to the London company is to the tune of Rs. 14 crores which is alleged to be the profit escaping assessment by alleged omission on the part of the London company to disclose its memorandum, articles and world balance-sheet. The present appeal is one of the off-shoots of the various proceedings initiated by the income-tax authorities against the London company and its subsidiary, I.C.I. (India) Ltd. The basic primary facts which are relevant for the purpose of this appeal are either admitted or, in any event, finally concluded by the decisions of the Income-tax Appellate Tribunal and the Supreme Court in a reference matter under section 52 of the Income-tax Act, 1961 [I.C.I (India) Private Ltd. v. Commissioner of Income-tax [1972] 83 ITR 710 (SC)]. The London company, viz., the appellant, is one of the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off the loan or loans then outstanding. It is I C.I.'s present intention to subscribe for so much of this later issue as will ensure that it retains control of the new company. (c) it may be convenient that I.C.I. (India) should for a time hold beneficially the shares which under this agreement are to be allotted to I.C.I. If this is done, I.C.I. (India) will pay the amount due on allotment and subsequent calls with money borrowed from I.C.I. Subsequently, I.C.I. (India) may repay the loan by transfer to I.C.I. of the shares so held. Government have no objection to this course of action. (4) After formation, I.E.L. will issue 20,00,000 shares and allot them as follows : 4,00,000 shares to Government 16,00,000 shares to I.C.I. (or I.C.I. India) Government and I.C.I. (or I.C.I. India) will take up the shares respectively allotted to them. (6) Government agree that if I.C.I. makes a loan to I.C.I. (India) and the latter holds shares in I.E.L. in the circumstances referred to in the recitals hereto that loan may be repaid by a transfer of the shares to I.C.I. at any time and I.C.I. may utilise the money due to it from I.C.I. (India) in the acquisition of such shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said agreement would be made for purchasing shares in the name of the I.C.I. (India) Ltd. in the said three companies with the foreign exchange advanced by the London company under the said declaration of intention dated the 5th of November, 1953. Thereafter, when the Finance Act, 1959, came into force and withdrew the tax reliefs as dividend, it was decided by the London company to exercise its right to call for the transfer of the shares of the said three companies from the I.C.I. (India) Ltd. and, as a result thereof, on the 16th of February, 1961, the London company exercised its right which was duly approved by the Reserve Bank of India and such transfer was completed in March and April, 1961. The A.C.C.I. shares were transferred by the I.C.I. (India) Ltd. to the London company on the 17th of March, 1961, the I.E.L. shares were transferred on the 25th of March, 1961, and the Atic shares were transferred on the 8th of April, 1961. As it has been stated earlier under the arrangement all these transfers were made at the face value of the shares in the said three companies by the Indian company to the London company. It is also an admitted case that the London company is an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convenient to mention that in the course of arguments in this appeal it was contended by Mr. Balai Pal, counsel for the respondent, that at no point prior to 11th of December, 1968, the Income-tax Officer had copies of the memorandum of association of the London company and as such he had no opportunity to consider the clauses therein to ascertain the objects and power of the London company. Dr. Debi Pal, appearing for the appellant with the leave of the court, produced certain correspondence between the Income-tax Officer and the representative of the London company which clearly show that copies of the memorandum and articles of association was asked for by the then Income-tax Officer for assessing the London company for the assessment year 1959-60. Leave was given to the appellant to file a supplementary affidavit annexing the copies of the said correspondence and the respondents were also given liberty to file an affidavit dealing with the same. Pursuant to such leave, affidavits were filed annexing the copies of the relevant correspondence which clearly, conclusively and beyond any doubt prove that memorandum and articles of association of the London company were duly furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the 27th of July, 1965, which are undisputed documents and in fact cannot be disputed, clearly and conclusively prove from the intrinsic evidence contained therein that there was such discussion as alleged by the appellant and the onus shifted to the respondents to disprove the said fact by filing an affidavit, if the allegations of the appellant were not true, through the said Income-tax Officer concerned, that is, Mr. M.S.M. Maraikayar, with whom the discussion took place. The respondents having not done so and merely denied the fact which is against the admitted documentary evidence produced by the appellant, it cannot be accepted, and it must be held that the appellant's contentions are true and correct. In this connection reference may be made to a letter dated the 2nd of January, 1962, which is at page 177 of the paper book being a letter written to the Income-tax Officer concerned in respect of the assessment of the appellant for the assessment year 1961-62. The said letter would appear at pages 37-39 of the additional paper book and the relevant portions are as follows : "Z/A/1 2nd January, 1962. The Income-tax Officer, 'C' Ward, Companies District IV, 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is recorded as follows : " Date of order : 29-5-65. ASSESSMENT ORDER The assessee-company carries on business in sale of dye stuffs and chemicals in India. Besides, it receives income being interest, royalty, technical fees and dividends from the Indian Cos. For this year it has filed a return of income admitting a total income of Rs. 1,08,90,033. In response to the notice u/s. 143(2), Shri Gangadharan of the Co. was present. I have discussed the case with him. 2. During the year of account the company received the following amounts as interest from I.C.I. (India) Pvt. Ltd. : (a) Rs. 5,50,000 being interest on the loan advanced by the assessee-company for the purpose of purchase of shares in M/s. Atic Industries Ltd. by I.C.I. (India) Pvt. Ltd. (b) Interest on current account : Rs. 43,624. (c) Rs. 9,62,515 being interest on the loan advanced for purchase of shares in Alkali and Chemical Corporation of India Ltd. The company has filed tax deduction certificates in respect of the above three items of interest issued by the paying company, viz., M/s. I.C.I. (India) Pvt. Ltd. However in the return of income filed, it has admitted only the first two items of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with the above assessments of I.C.I. Ltd. 1. We enclose extracts from the minutes of the meeting of the board of directors of I.C.I. (India) held on 27th March, 1957, and 30th September, 1958, wherein the rate of interest payable on loan of Rs. 180 lakhs from I.C.I. was approved at 1 1/2% above the Indian bank rate with a minimum of 5% per annum. 2. The research contributions payable by Atic were in the nature of contributions towards the research expenditure incurred by I.C.I. and, therefore, the Rolls Royce Ltd., v. Jeffrey Inspector of Taxes) case does not have any relevance to the subject. Yours faithfully, for Imperial Chemical Industries Ltd for I.C.I. (India) Private Ltd., Agents. Sd./- N. L. Gangadharan, for Chief Accountant." Encl : Another letter dated the 2nd of August, 1965, in respect of the assessment of the appellant for the year 1962-63, to the Income-tax Officer in which it is recorded that there was telephonic discussion between the said N. L. Gangadharan and the Income-tax Officer in connection with the said assessment year relating to the transfer of the shares. The said letter is at page 47 of the additional paper book and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1962-63 was completed on the 27th of July, 1965, which was served on the appellant on the 7th of August, 1965. The letters dated the 27th July, 1965, and 2nd of August,1965, have already been set out before, which clearly record the fact of discussion between Mr. N. L. Gangadharan, the appellant's representative, with the Income-tax Officer concerned regarding the said loan transactions leading to the transfer of the said shares under the arrangement. Thereafter, another chapter was opened by the Income-tax Officer by successive notices being served, the first was on the 29th of March, 1967, being the notice under section 16(1) of the Gift-tax Act issued by the Gift-tax Officer, 'B' Ward, Companies District IV, to I.C.I. (India) Ltd. asking it to submit the return of gift alleged to have been made by the said I.C.I. (India) Ltd. in the assessment year 1962-63, being the transfer of the shares in the said three companies being A.C.C.I. Ltd., I.E.L. Ltd. and Atic Ltd. to the appellant otherwise than for adequate consideration. The said notice is set out at page 304 of the paper book in this appeal. It is not necessary to go into the details of the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61, served on the appellant for reopening the assessment of the appellant for the assessment year 1962-63. The alleged reason for such reopening as recorded by the Income-tax Officer for issuing the said notice under section 148 dated 23rd of September, 1968, is at pages 49 and 50 of the additional paper book wherein it is, inter alia, alleged that the appellant has made a profit of about Rs. 14,40,62,901 is a result of the said transfer of shares in the three companies by the I.C.I (India) Ltd. in repayment of the loan advanced from time to time at face value of the shares. It is alleged that the appellant should have declared the said amount being the difference between the market price and the face value of the said shares in the said three companies as its profits and due to such failure the income has escaped assessment for the year 1962-63, of the appellant. Pursuant to the said 1st notice dated the 23rd of September, 1968, the appellant, after asking for the reasons for such reopening of the assessment for the assessment year 1962-63, which was supplied in due, course by the income-tax authorities (sic) the appellant was also served with the notice under section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the transfer of the shares in the three companies at par value being the exact amount of alleged profit under the previous notice. Only with the additions of grounds that, under clause 4(1) of the memorandum of association, the appellant was carrying on business as capitalist and financier of associated companies and as such the appellant should have shown the interest received from the loan as income from interest and net income from other sources. It was further stated that the difference between the market price and the face value of the transfer of shares represented the business profit and has not been shown as such, and thirdly, the appellant did not file the memorandum, articles of association and the world balance-sheet at the time of original assessment for the year 1962-63, before the Income-tax Officer and, therefore, the appellant was guilty of failure to disclose all the said primary facts of the appellant's business income to the extent of the said sum of Rs. 14,40,62,901 which has escaped assessment being the identical figure of the first notice. Thereafter, on the 20th of May, 1970, the present impugned notice under section 148 of the Income-tax Act, 1961, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal court constituted by B. C. Mitra and A. K. Janah JJ. From the above facts it appears that the appellant's transaction was under the arrangement and agreement which was arrived at and recorded between the Government of India, the appellant, i.e., I.C.I. London and I.C.I. (India) Ltd., by the declaration of intention dated the 5th of November 1953, relevant portion of which has been set out before. Loans and advances were made by the appellant from time to time, to the I.C.I, (India) Ltd., its hundred per cent. subsidiary for requisition of the shares of the said three companies, viz., A.C.C.I. Ltd., I.E.L. Ltd. and Atic Ltd., and finally, the said shares were recalled in repayment of the loans and advances made by the appellant under the said arrangement and agreement from diverse dates in 1961, as has already been stated before. The said recalling of loans and advances by transfer of the shares of the said three companies by the I.C.I. (India) Ltd., to the appellant have given rise to several proceedings first for capital gains tax against the I.C.I. (India) Ltd., which ultimately failed. Simultaneously, for proceeding against the appellant for reopening the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng found by I.C.I. The above background would show that the idea was not to make the assessee the real beneficial owner of the shares. The fact that the shares should be held only for a time beneficially by the assessee is clear from the " declaration of intention " dated 5th November, 1953." Then at pages 261-262 of the paper book in paragraph 30 the Tribunal, after discussing the arguments and the facts, held as follows : " ........... Taking this along with the minutes of the meeting with the officials of the Government of India in October, 1953, it is clear that the whole idea of I.C.I. throughout was to make some funds available to the assessee so that the shares could be acquired in its name and that the shares could be transferred to I.C.I. as and when it demanded. The earliest expression that is used is 'take over' .......... In our opinion the very words 'take over' in the context of the relationship between the assessee and go to show that the idea was to take back the shares in discharge of the loan. Otherwise, there was no need to mention to the officers of the Government of India as early as October, 1953, that the assessee wanted to have the shares held by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book, the Tribunal observed as follows : " 36. It remains for us to deal with the transaction relating to the shares in the other two companies. The scheme for manufacturing polythene by A.C.C.I. was placed before the Government of India, by a letter of the assessee dated 13th December, 1965, addressed to H. V. R. Iyengar, Secretary, Ministry of Commerce and Industry. In paragraph 7 of the annexure to that letter it was specifically stated that to enable the assessee to subscribe for the new shares, I.C.I. would lend the subscription monies to the assessee on the understanding that at a later date I.C.I. could acquire at the issue price, these new shares in satisfaction of its loan. In the application to the Controller of Capital Issues it was mentioned (page 176 of book I) that the assessee has undertaken to subscribe at the issue price for the new shares to be provisionally allotted to the assessee strictly in accordance with its present shareholding. It is also mentioned that the share could be acquired at the, issue price by I.C.I." The Tribunal after dealing with the arguments on behalf of the income-tax authorities and also the facts at page 269 of the paper book par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages of the appeal paper book wherein the Supreme Court judgment has been set out. The Supreme Court observed at pages 427-428 as follows (See 83 ITR 712,713) : " The Tribunal upheld the decision of the Appellate Assistant Commissioner by a detailed and well reasoned order. Broadly, the case of the assessee was that I.C.I. wanted to make investments in India in sterling currency. The assessee was already in existence but the other three companies, which have been mentioned, were incorporated later. I.C.I. devised a scheme by which it could make the investment as desired by it and by which it could also take advantage of the tax relief which could be availed of by the new enterprises under sections 15C and 56A of the Indian Income-tax Act, 1922. The scheme in short was that I.C.I. would arrange to let the assessee hold shares in the three companies by investing the money which was to be given by I.C.I. to the assessee. The modus operandi was that I.C.I. would give that money by way of loans to the assessee who agreed that the shares in the three companies would be transferred to I.C.I. in satisfaction of the loans at par or issue price as and when desired by I.C.I. All this wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en effected with the object of avoidance or reduction of the liability of the assessee to capital gains which alone could attract the applicability of section 52 of the Act. " Then at page 459 of the paper book the Supreme Court observed as follows (See 83 ITR 714) : " The Tribunal examined fully the correspondence and the other material with regard to each of the three Indian companies in which the investment had been made of the money advanced by I.C.I. to the assessee." Thereafter, the Supreme Court noted briefly the discussion relating to the transaction as made by the Supreme Court and quoted the relevant portions therefrom which I have set out before. Finally the Supreme Court held at pages 438-439 of the paper book as follows (See 83 ITR 718, 719) : " We are altogether unable to see how findings of the Appellate Tribunal that the transfer of shares in the present case was not made with the intention or object of avoidance or reduction of liability to capital gains were not questions of fact and did not depend on inference of facts from the evidence or the material before the Tribunal. It can well be said that the determination of the question whether the object of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to December, 1968. There cannot be any doubt whatsoever that the respondents are either wrong or deliberately avoiding to admit the fact that the memorandum and articles of association were filed by the appellant when asked by the then Income-tax Officer concerned being one, Srivastava, in 1961, to which reference has already been made. The way the affidavit disclosing the relevant correspondence showing the filing of these two documents by the appellant with the income-tax authorities has been dealt with in the affidavit filed by the respondents in this appeal leads to the conclusion that the memorandum and articles of association were already in the assessment records of the appellant since 1961. The respondents simply stated through a Tadbirkar of this appeal proceeding that the said memorandum and articles of the appellant cannot be traced out, which were filed in 1961, as appearing from the correspondence disclosed by the appellant in this court. From the facts discussed above it must be held that the respondents are not correct as to the existence of one of the reasons for issuing the second notice under section 148, viz., that the appellant did not disclose its memorandum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by the parties fell through. Consequently, the assessee-company decided to sell the said shares of the sugar company from time to time which resulted in an excess of Rs. 2,26,700 over the original cost price. The said excess amount was sought to be taxed by the Income-tax Officer as profit whereas the assessee-company alleged that the same was capital appreciation. So, the only question was whether the said amount was a receipt from business or a mere appreciation of capital. The income-tax authority relied on a clause of the memorandum of association of the assessee-company which stated "to undertake the management of a commercial undertaking" and contended that the said excess amount was a profit earned in course of carrying on a business under the said object clause of the memorandum of association of the assessee-company. Mahajan C.J., at page 52 of [1955] 27 ITR 49 (SC), dealing with the question observed as follows : " If the acquisition by the assessee-company of the managing agency of a commercial undertaking were outside the objects clause of the memorandum of association then such acquisition would have been wholly ultra vires. The circumstance whether a transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the said question depends solely on the nature of the transaction which resulted in the profit being credited to the assessee-company for the said amount, in this case it must be held that the appellant-company was not guilty of omission to disclose its memorandum and articles of association sought to be alleged by the income-tax department as those documents were already in the file and produced before the Income-tax Officer in the year 1961, and there is ample material to hold that the said documents were in the file of the assessee for the relevant assessment year 1962-63. So there cannot be any question of not disclosing the said documents as sought to be alleged by the said secon notice date the 20t of May, 1970. That reason must be held to be without any basis and entirely wrong and incorrect. Mr. Balai Pal appearing for the respondent also sought to contend that even assuming that the said documents were produced before the Income-tax Officer for the relevant assessment year, i.e., assessment year 1962-63, by the appellant it would not amount to disclosure within the meaning of Explanation 2 of section 147 of the Income-tax Act, 1961, which runs as follows : " Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir money can be applied. In the second place, it gives protection to persons who deal with the company, and who can infer from it the extent of the company's powers. The narrower the objects expressed in the memorandum the less is the subscriber's risk, but the wider such objects the greater is the security of those who transact business with the company .......... " For the purpose of determining whether a company's substratum is gone, it may be necessary to distinguish between power and object and to determine what is the main or paramount object of the company but I do not think this is necessary where a transaction is impeached as ultra vires. A person who deals with a company is entitled to assume that a company can do everything which it is expressly authorised to do by its memorandum of association, and need not investigate the equities between the company and its shareholders. Those are classic passages in Colman v. Brougham [1918] AC 514 (HL) as laid down by Lord Parker. Recently the construction of clauses of memorandum of association came up before the English Court of Appeal in Introductions Ltd. v. National Provincial Bank Ltd. The trial court decision is report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in particular by the issue of debentures, or debenture stock perpetual or otherwise and to secure the repayment of any money borrowed or raised by mortgage, charge or lien upon the undertaking and the whole or any part of the company's property or assets whether present or future including its uncalled capital and also by a similar mortgage, charge or lien to secure and guarantee the performance by the company of any obligation or liability it may undertake." and the object clause in the memorandum of association of the company ended with the clause as follows : " It is hereby expressly declared that each of the preceding sub-clauses shall be construed independently of and shall be in no way limited by reference to any other sub-clause and that the objects set out in each sub-clause are independent objects of the company." In the light of those main object clauses in the memorandum and the said two clauses which have been set out before, two questions were for consideration before the courts : (1) Whether, on the true construction of the memorandum and articles of association of the company, the carrying on of the business of pig breeders as its sole business was intra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-clause (D) which states : 'To carrying on any of the trade or business ... which can in the opinion of the Board ... be advantageously carried on ... in connection with or as ancillary to any of the above business...' Then there is sub-clause (1), which is, 'to promote any other company for the purpose of acquiring any property or rights or converting any of the liabilities of this company or of its undertakings. And there are other similar sub-clauses which are clearly ancillary powers although under the concluding words they are stated to be independent objects." Then, Harman L.J. concluded at page 890 of [1969] 1 All ER 889 ; 39 Comp Cas 919, 925 (CA), after relying on the passages of the trial court judge Buckley J., reported in [1968] 2 All ER at page 1221 observed as follows : " I agree with the judge that it is a necessarily implied addition to a power to borrow, whether express or implied, that one should add 'for the purposes of the company'. This borrowing was not for a legitimate purpose of the company ; the bank knew it, and, therefore, cannot rely on its debentures." He dismissed the appeal. The principles on which object clauses of the memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of carrying on its main object. By no stretch of imagination or rules of construction of such document as the memorandum of association of a company can it be held that the said clause relates to an independent clause and empowers the appellant-company to carry on business of financiers or moneylenders. It is merely an ancillary power to give effect to the main objects of the company, that is to establish or finance subsidiary or associated companies for the manufacture of chemicals and allied products all over the world. Factually, the question of the said aspects of the object clause of the memorandum has been discussed with the Income-tax Officer by the appellant's representative, Mr. Gangadharan, as recorded in the assessment orders of the relevant assessment year which has been mentioned hereinbefore and, in fact, the then Income-tax Officer who may be said to be a competent and reasonable person had accepted the position and taxed the interest paid by the I.C.I. India to the appellant during the relevant assessment year as " income from other sources " having regard to the nature of the agreement and transactions sources of the advance and loan by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Act. There must be reasons to believe that income has escaped assess- ment, and the same has occurred due to-- (a) Omission or failure on the part of the assessee to make a return of income, or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. It is the duty of the assessee who wants the court to hold that the said jurisdiction was lacking, to establish that the Income-tax Officer had no material at all before him for believing that there had been such non-disclosure. See pages 199 and 202 of [1961] 41 ITR. The expression "reason to believe postulates belief and the existence of reasons for that belief". The belief must be held in good faith it cannot be merely a pretence. See page 210 of [1961] 41 ITR and also S. Narayanappa v. Commissioner of Income-tax [1967] 63 ITR 219, 221 (SC). It is now well settled that if the assesee has disclosed primary facts relevant to the assessment, he is under no obligation to instruct the Income-tax Officer about the inference which the Income-tax Officer may raise from those facts. The terms of the Explanation to section 34(1) of the 1922 Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng transfer of shares by one company to another under an agreement between the said two companies and the questions for decision before the Supreme Court were : (1) whether proceedings initiated under section 34(1)(a) (1922 Act) are valid ; (2) whether section 12B (1922 Act) is attracted to the facts of the cases ; (3) if section 12B was attracted what was the amount of capital gains made. It may be pointed out that the said proceedings were under the 1922 Act and the corresponding sections of the 1961 Act are now section 147(a) and section 52. There the Supreme Court on the basis of the agreement held that the profit must be assessed according to the terms of the said agreement and not on the basis of difference between the market price and the value at which it is assessed. Dealing with the questions at pages 418, 419 of [1973] 87 ITR 407 (SC), Hegde J. observed as follows : " Clause (1) of the agreement in specific terms says that 'the existing partners shall sell and the company shall purchase the shares and securities for a sum of rupees seventy-five lakhs'. Clause (3) of that agreement merely provides a mode of satisfaction of the sale price. The sale price fixed by the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on that basis came to the conclusion that the assessee-company must be deemed to have made a profit of a certain amount. The head-notes of the said report have correctly set out the finding of the Supreme Court in that case which are as follows : " Held, (i) the assessee and its subsidiary were two different legal entities. The transaction between the assessee and its subsidiary company was a bona fide transaction and the assessee had not made any secret profits out of the transaction in question. Unless the Income-tax Officer, on the basis of material before him is able to come to the conclusion that the assessee had really made profits in the transaction, it is not permissible to him to add back to the assessee's return any fictional income. (ii) In the absence of any evidence to show either that the sales were sham transactions or that market prices were in fact paid by the purchaser, the mere fact that the goods were sold at a concessional rate to benefit the purchaser at the expense of the company would not entitle the income-tax department to assess the difference between the market price and the price paid by the purchaser, as profits of the company. Sri Ramalinga Choo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52 proceeding which has been referred to earlier. It would also be useful for referring to another recent Supreme Court decision in Commissioner of Wealth-tax v. Spencer Co. Ltd. [1973] 4 SCC 204 ; [1973] 88 ITR 429, where the facts and the decision of the Supreme Court have been correctly summarised in the head-notes of the said report which are as follows : " Respondent was a public limited company carrying on business of store-keepers, commission agents, retailers, manufacturers, hotel-keepers and catering service in South India. Another company, M/s. G. F. Kellners Co., were railway caterers in North India. In 1929, the respondent-company acquired 1,59,924 preference shares out of 1,60,000 preference shares and 1,99,948 equity shares out of 2,00,000 enquity shares of Kellners. The acquisition was done partly for cash and partly in lieu of shares of the respondent-company issued to the shareholders of Kellners. In 1930, the respondent company acquired all the assets and goodwill of Kellners for Rs. 31,26,000. Part of the consideration was to be paid in cash on demand by Kellners. One of the terms of the agreement was that in the event of Kellners going into voluntary liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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