Law: Income Tax Act, 1961

Section: 41(2)

Law: Income Tax Act, 1922

Section: 10(2)(vii)

Section 41(2) of the Income-tax Act, 1961 [Corresponding to section 10(2) (vii) of the Indian Income-tax Act, 1922] - Balancing charge - Assessment year 1956-57 - Whether where during relevant accounting year assessee company sold colliery owned by it to another company and loss occurred due to difference between book value of assets and price fixed for sale and said loss was written off in its books by assessee, said loss was allowable under section 10(2)(vii) of 1922 Act in computing total income of assessee - Held, yes Section 72, read with section 14, of the Income-tax Act, 1961 [Corresponding to section 24(2), read with section 6, of the Indian Income-tax Act, 1922] - Losses - Carry forward and set off of business losses - Assessment year 1956-57 - Whether were shares on account of which dividends were received formed part of assessee's stock-in-trade, assessee was entitled to set-off its business losses brought forward from earlier year against dividend income - Held, yes FACTS During the accounting year relevant to the assessment year 1956-57, the assessee-company entered into an agreement with another company to sell the colliery owned by it. According to this agreement the vendor was to sell and the purchaser was to buy as on and from 1-9-1954, all the underground rights, etc. of the colliery with the machinery and other articles detailed in the scheduled annexed to the agreement. The purchaser was to get all the profits and was liable for all the losses from that date. The price fixed for the colliery was Rs. 3,50,000. The book value of the assets was Rs. 4,80,290. In the relevant assessment year the loss of Rs. 70,290 was claimed by the assessee. The ITO rejected the claim for deduction of the loss from the assessee's other income on the ground that during the accounting period the assessee did not carry on the business of colliery since the transfer took place with effect from 1-9-1954. After making adjustment for certain assets which, according to the ITO, were not entitled to depreciation he determined the figure of loss. The Tribunal accepted the contention of the assessee that it carried on business till 29-11-1954, but did not allow the loss as…

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