Law:

Section:

Section 41(2) of the Income-tax Act, 1961 - Balancing charge - Whether what is relevant for section 41(2) is cost price and depreciation allowed under section 32 and, therefore, where there was no finding as to what was cost price of assets sold, matter had to be remanded back to decide accordingly - Held, yes Section 45 [as it stood at relevant time] of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1968-69 - Whether where question of sale price of assets sold by assessee-company was examined by authorities without reference to section 45 and whereas in allowing assessee's contention that alleged gratuity liability incurred by it was deductible from total sale price, authorities had not ascertained as to whether there was such a liability, matter had to be remanded to Tribunal to decide accordingly - Held, yes Facts During the accounting year relevant to the assessment year 1968-69, the assessee-company sold its assets to another company. The assessment was made after deducting from the total sale price, the gratuity liability alleged to have been incurred by the assessee and the value of land transferred along with the other assets. Subsequently, the reassessment was made and deduction of payment of gratuity liability incurred by the assessee was disallowed. On appeal, the AAC held that the sale proceeds, for the purpose of determining the income, ought to have been determined after deducting from the total amount the liability incurred by the assessee for payment of gratuity and, therefore, reversed the ITO's order. On appeal by the revenue, the Tribunal confirmed the AAO's order. On reference: Held The question whether income has escaped assessment must be considered with reference to section 41 as well as section 45. For the purpose of these two provisions, the actual cost price as well as the actual sale price must be found. The question of sale price was examined by the authorities without reference to the ingredients of section 45. It was only considered with reference to section 41, though, section 41 has no relevance to the sale price. What is relevant for section 41 is the cost price and the depreciation allowed under…

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