Law: Income Tax Act, 1922

Section: 10(2(vii)

Income-tax Act (XI of 1922)---S. 10(2(vii), second proviso-Income from sale of assets-Transfer of assets of firm to private limited Company constituted by partners of such firm-Held, a sale and profits earned by assessee in such transac­tion liable to tax-[Commissioner of Income-tax v. Public Industries P L D 1969 Kar. 606 dissented from]. Commissioner of Income-tax v. A K. Plywood Company 1980 P T D 270; Commissioner of Income-tax, North Zone, Lahore v. Haji Abdul Majid Khan Zaman & Co. P L D 1973 Lah. 843 and Maharajadehiraj Sir Kamesh­war Sing v. Commissioner of Income-tax (1963) 48 I T R 483 ref. Commissioner of Income-tax v. Public Industries P L D 1969 Kar. 606 dissented from. JUDGMENT ABDUR REHMAN KHAN KAIF, J.-The assesses in this case is a partnership firm known as Messrs Karim Industries (hereinafter called the firm). This firm had been carrying on business of Steel Re-Rolling and Iron Manufactur­ing. The firm in addition to the normal return relating to the previous year ending 30th March 1961 filed a supplementary return covering the accounting period 1-4-1961 to 30-6-1961. The Income-tax Officer treated this as relating to the assessment year which be termed as assessment year 1961-62 (supplementary) and passed the assessment order thereon. It trans­pired that the assessee firm had transferred all its assets and liabilities including its fixed assets like land, building, machinery etc., to a limited company of the same name and style, namely, Karimi Industries Ltd. The transfer of the assets was accordingly treated by the Income-tax Officer as sale of assets within the meaning of section 10(2)(vii) of the Income-tax Act, 1922 and the difference between the transfer value and the written down value totalling Rs. 1,54,230 was included in the total income of the assesses for the purpose of levy of income-tax. " 2. Being aggrieved the assessee filed an appeal before the Appellate Assistant Commissioner where several objections were raised. The Appellate authority by his order dated 5-12-1966 set aside the order on the ground that the income of the period in question related to the assessment year 1962-63 and not to 1961-62 and that fresh assessment…

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