COMMISSIONER OF INCOME-TAX, GUJARAT II vs B. M. KHARWAR — 1972 PTD 618

Citation: 1972 PTD 618

Court: Supreme Court of India

Year: 1968

Decision Date: 1968-08-13

Parties: COMMISSIONER OF INCOME-TAX, GUJARAT II vs B. M. KHARWAR

Headnotes

Case cited as 1972 PTD 618

Judgment Text

Court Name: Supreme Court of India Judge(s): V. Ramaswa mi, A. N. Grover, J. C. Shah Title: COMMISSIONER OF INCOME-TAX, GUJARAT II vs B. M. KHARWAR Case No.: Civil Appeal No. 1678 of 1966 Income-tax Reference No. 10 of 1965 Date of Judgment:1968-08-13 Reported As: 1972 PTD 618 Result: Appeal allowed JUDGMENT JUDGMENT SHAH, J.----The respondents-a firm which carries on the business of manufacturing, purchasing and selling cloth-closed its manufacturing side of the business and transferred its machinery to a private limited company in the share capital of which the partners of the firm had the same interest as they had in the assets and profits of the partnership. In the assessment year 1959-60 the Income-tax Officer, Surat, brought to tax under section 10(2)(vii), proviso (ii) of the Income-tax Act, 1922, Rs. 40,743 being the excess realised over the written down value of the machinery. But the Income-tax Appellate Tribunal had, relying upon the decisions in Commissioner of Income-tax v. Sir Homi Mehra's Executors ((1955) 28 I T R 928), Rogers & Co. v. Commissioner of Income-tax v. ((1958) 34 I T R 336) and Commissioner of Income-tax v. Mugneeram Bangur & Co. ((1963) 47 I T R 565), that the firm "transferred the machinery only with a view to carry on the business as a company rather than as a firm", and by that transfer no profit in a business sense could be deemed to have resulted to the firm. The following question referred by the Tribunal: "Whether, on the facts and in…

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