Law:

Section:

Section 256, read with sections 49 and 50, of the Income-tax Act, 1961 - Reference - Question of fact - Assessee-company took over entire business including stock-in-trade, goodwill and benefit of pending contracts of a firm - Whether any referable question of law arose from Tribunal's order holding that benefit of section 49(1)(iii) read with section 50(2) could be given to assessee for purpose of computing capital gains - Held, no FACTS The assessee-company took over the partnership business of a firm under an agreement. As a result of the agreement the business carried on by the partnership was taken over as a going concern together with goodwill, plant, engines, machinery, spare parts, tools, utensils, stores, stock of raw materials, stock-in-trade, stock of containers and all other assets, properties, articles and things except that cash in hand and at the banks belonging to the partnership as also its outstanding and debts were not taken over. The assessee sold a boiler and claimed the option under section 49 of substituting for his cost the fair market value on the date of sale. The department disallowed the assessee's claim and held that the provisions of section 50(1) were applicable to compute the capital gains. On appeal, the Tribunal allowed the assessee's claim that the benefit of section 49(1)(iii)(a ), read with section 50(2) should be given to it. The reference application of the revenue was also rejected. On an application under section 256(2) : HELD Following the decision of the Supreme Court in the case of CIT v. K.H. Chambers [1965] 55 ITR 674 , the assessee was a successor of the partnership. The mere fact that the debts and liabilities of the partnership were not taken over by the assessee was not sufficient to disentitle the assessee from claiming the status of a successor to the partnership when the entire business including its stock-in-trade, goodwill and the benefit of pending contracts was taken over by the assessee for the purpose of computing the capital gains. Therefore, the Tribunal was justified in holding that the benefit of section 49(1)(iii)( a), read with section 50(2) could be given to the assessee. No question of law arose…

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