Law:

Section:

Section 41(2) of the Income-tax Act, 1961 - Balancing charge - Assessment year 1963-64 - In terms of an agreement between assessee-company and 'SB', SB took over all liabilities including contingent liabilities of assessee and accounted entire assets except surplus assets being left with assessee in cash - As result of taking over there was a loss or deficiency in transfer of certain assets, but there was profit or surplus on transfer of furniture and fixtures - After adjusting book surplus against net loss, there was still a net loss which was disallowed by Income-tax Officer as capital loss - Commissioner acting under section 263 held that profit on sale of furniture and fixtures was taxable under section 41(2), and directed inclusion of amount representing depreciation granted in earlier years on items of transfer - Tribunal confirmed Commissioner's order - Whether since business was very much in existence in relevant previous year, Explanation to section 41(2) was not applicable - Held, yes - Whether, therefore, amount of depreciation granted to assessee in earlier years on items of transfer represented difference between actual cost and written down value of furniture contemplated by section 41(2) and rightly brought to tax under section 41(2) - Held, yes Section 263 of the Income-tax Act, 1961 - Revision-of orders prejudicial to interests of revenue - Whether power of Commissioner under section 263 is restricted only to errors so far as they are prejudicial to interests of revenue - Held, yes - Whether, therefore, order of Tribunal that matter, as regard adjustment of loss claimed by assessee, was concluded by ITO in his assessment order to prejudice of assessee and it could not be considered in proceedings under section 263, was justified - Held, yes FACTS Following an agreement between the assessee-company and the 'SB', 'SB' took over all the liabilities including the contingent liabilities of the assessee and accounted the entire assets except the surplus assets being left with the assessee in cash. As a result of taking over of the assets like balance with other banks, Govt. securities, furniture and fixtures etc. there was a loss or deficiency, while…

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