Law:

Section:

Section 41(2) , read with section 10(3), of the Income-tax Act, 1961 [Corresponding to section 10(2)(vii), read with section 4(3)(vii) of the Indian Income-tax Act, 1922] - Balancing charge - Assessment year 1951-52 - Whether if tax is to be charged on income in accordance with provisions of Act and if a sum deemed to be profits under second proviso to section 10(2)(vii) of 1922 Act falls within ambit of expression 'income', then there is no inconsistency between provisions of section 3 and section 4 and second proviso to section 10(2)(vii) of 1922 Act - Held, yes - Whether gains under second proviso to section 10(2)(vii) of 1922 Act are not of casual or non-recurring nature and cannot, therefore, be exempted from taxation - Held, yes Section 256 of the Income-tax Act, 1961 [Corresponding to section 66(1) of the Indian Income-tax Act, 1922] - High Court - Reference to - Whether if after careful examination of proviso, provision to which it is attached, and Act as whole, Court comes to conclusion that Legislature intended to create liability, it is duty of Court to give effect to intention even though it is embodied in proviso - Held, yes FACTS The assessee firm purchased a Flour mill in the year 1945 and sold it in the year 1950. During the period of said five years, the mill was used for the purpose of the assessee's business and the depreciation was allowed on the building, plant and machinery. The income-tax authorities included the amount of depreciation in the income, profits and gains of the assessee firm in the relevant assessment year under the second proviso to section 10(2)(vii) of the 1922 Act. On appeal, the Tribunal reduced the addition. It also held that the impugned proviso was not invalid or inoperative in the eye of law. On reference, the assessee contended that the proviso in question is repugnant to the charging provisions of sections 3 and 4 of the 1922 Act and consequently that it must be deemed to be void for repugnancy. It also contended that the excess of the sale price of depreciable assets over their written down value to the extent of the depreciation allowed in the past, was a receipt of casual and non-recurring nature not arising…

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