Law: Income Tax Act, 1922

Section: 12,12B(1)

[Indian Income Tax Act, 1922 (XI of 1922)]........Section 12 B(1) Sale Company-Distribution of assets of company in liquidation- Whether amounts to transaction of sale, exchange, relinquishment or transfer- Held no. Case appeared: Madurai Mills Co. Ltd. v. Commissioner of Income-tax, Madras [1969] 74 I.T.R. 62 . Cases referred to: Commissioner of Income-tax v. R M. Amin [1971] 82 I.T. R. 194 (Guj) ;Commissioner of Income tax v. Associated Industrial Development Ca. (P.) Ltd. [1969] 73 I. T. R. 50 (Cal) : Commissioner of Income-tax v. Bankey Lal Vaidya [1971] 79 I. T. R. 594 (S.C.) ; commissioner of Income- tax v. Dewas Cine Corporation [1968] 68 I. T. R 240 2 [1968l 2 S C. R. 173 (S.C) ; James Anderson v. Commissioner of Income-tax [1960] 39 I.T.R. 123; [1960] 3 S.C.R. 167 (S.C.) ; and Windsor Steam Coal Ca., In re [1929] 1 Ch 151 (C.A.). JUDGMENT [The Judgment of the Court was delivered by Khanna J]--This appeal on certificate has been filed by the Commissioner of Income-tax against the judgment of the Madras High Court whereby that Court answered the following question referred to it under Section 66(1) of the Indian Income- tax Act, 1922 (hereinafter referred to as "the Act"), in the negative in favour of the assessee-respondent: "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the sum of Rs. 95,944 is liable to tax under Section 12B(2) ?" The matter relates to the assessment year 1961-62. The assessee is a public limited company carrying on the business of manufacture and sais of yarn. The assessee held shares in the following companies as under: (1) Indian Mills Supply Company (Private) Ltd., 2,700 shares of the face value of Rs. 100. (2) Harveys (Private) Ltd., 1,000 shares of the face value of Rs. EOG. (3) Pandyan Weaving Mills (Private) Ltd., 1802 shares of the face value of Rs. 100. The above three companies went into voluntary liquidation in December, 1959. In the course of the liquidation proceedings, the liquidators made distribution in the relevant year of account and the assessee-company got cash or assets in lieu of cash of the amount of Rs. 4,57,858, Rs. l,41,739 and Rs. 1,231,175 in respect of Indian…

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