Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss - Allowable as - Assessee transferred its banking business to another bank in terms of agreement which provided for valuation of various items of assets and liabilities of assessee to be taken over by transferee and in process suffered loss in respect of transfer of Government securities - ITO disallowed such loss as deduction holding it to be capital loss - Whether since there was no slump sale of assets and there was sale of particular items of assets for a stated consideration, loss incurred in process of transfer of securities in favour of transferee bank was admissible - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee bank transferred its banking business to another bank and transferred a sum to transferee bank as gratuity payable to employees who were taken over by said bank - Assessee claimed that amount as deduction - Whether when assessee-bank transferred a part of its business and thereby it compelled employees to retire from its business, gratuity was payable to them, still obligation to pay gratuity arose only by virtue of transfer of business and, as a matter of fact, transfer of business and obligation to pay gratuity were contemporaneous or simultaneous and, therefore, the payment of gratuity could not be said to be an item of expenditure incurred in course of carrying on business or for purpose of carrying on business - Held, yes FACTS The assessee transferred its banking business to the KVB Ltd. The agreement between the parties provided for the valuation of the various items of assets and liabilities of the assessee to be taken over by the KVB Ltd. in the process of taking over the banking business of the assessee. Clause 4 stated that the transferor-bank (assessee) would transfer and the transferee-bank would take over from the transferor-bank the liabilities and assets as described in Schedules 'A' and 'B', respectively, as on 3-4-1964, subject to the variations on the date of actual transfer. Schedule 'B' gave the book value of the Government securities and the market value. At the same time, the agreement also provided that the…

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