Law:

Section:

Section 43(1) of the Income-tax Act, 1961 [Corresponding to section 10(5) of the Indian Income-tax Act, 1922] - Actual cost - Assessment years 1952-53 and 1953-54 - Whether if circumstances exist showing that fictitious price has been put on assets or there is fraud or collusion between vendor and vendee and there has been inflation or deflation of value for ulterior purposes, it is open to income-tax authorities to refuse to accept price mentioned in deed or alleged by assessee and to ascertain what actual original cost was - Held, yes FACTS the assessee, purchased by a deed of conveyance dated 3-4-1966, executed by the liquidators of all the colliery lands, hereditaments and premises, mines, minerals, power and privileges and all other hereditaments together with the machinery thereon belonging to the latter company. the consideration for the transfer was Rs. 6 lakhs and was allocated as follows : (a) the value of the machinery plants stores including stock of goods grains coals at the pithead and other movable properties appertaining to the said colliery the property in which was capable of passing by delivery being .... Rs. 3,50,000 (b) the value of the buildings and structures belonging to the said colliery being .... Rs. 1,50,000 (c) the value of the rest of the properties appertaining to the said colliery not capable of being passed by delivery being .... Rs. 4,00,000. The depreciation had been allowed for the assessment years upto 1952-53 on the written down value. In the assessment year 1952-53 before the AAC the assessee raised a ground that the ITO should have worked out the depreciation figures on the basis of balance-sheet valuation of the assets as per the audited accounts submitted by the assessee and as claimed in the return. But the plea was turned down. The Tribunal asked for a remand report from the ITO. the ITO in the remand report stated that some of the directors and shareholders of the two companies were the same and they were connected in many ways, that the valuation of the depreciable assets and the consumable stores had been written up, whereas the valuation of the non-depreciable assets like mines etc. had been written down and that…

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