Law: Income Tax Act, 1922

Section: 10(7)

Law: Income Tax Act, 1961

Section: 44

Section 44 of the Income-tax Act, 1961 [Corresponding to section 10(7) of the Indian Income-tax Act, 1922] - Insurance business - Assessment years 1953-54 and 1954-55 - Assessee-company entered into agreement on 1-10-1952 with a foreign company, carrying on insurance business in India - Assessee agreed to take over business of foreign company against payment of certain amount-Creditors of foreign company in its meeting held on 27-3-1954 approved aforesaid agreement - Court accorded its sanction to agreement on 10-7-1954 - Assessee claimed that businesses of foreign company and that of assessee company, became merged into one business on and from 1-1-1952, and that computation of profits should be under same rule, either rule 2(a) or rule 2(b) of schedule to 1922 Act or both, and that it would not be open to department to treat businesses as those of two companies and apply rules on that basis - Whether order of Court sanctioning scheme of arrangement have a restrospective operation, so as to claim that scheme had been in operation from date, anterior to date of sanction - Held, no - Whether it is only court that can bring about transfer by appropriate order and parties to a transfer cannot come to court and say that there is already an instrument of transfer governing them as and from a particular point of time, and that court should not merely sanction it but also effectuate it from operational point of time agreed to by parties - Held, yes - Whether, therefore, there was no transfer on and from 1-1-1952 and foreign company was independent entity during relevant assessment years - Held, yes FACTS The assessee-company was formerly carrying on the life insurance business. The Life Insurance Corporation of India had taken over that business and the assessee was not represented by the Corporation. The assessee entered into an agreement on 1-10-1952, with a foreign insurance company carrying on the insurance business in India under which the foreign company should transfer all its assets and liabilities in regard to its life insurance business in India to the assessee-company in consideration of the assessee paying the foreign company certain amount, which was the…

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