Law: Income Tax Act, 1961

Section: 60

2000 P T D 1384 [237 I T R 617] [Supreme Court of India] Present: M. Srinivasan and Umesh C. Banerjee, JJ DALMIA CEMENT LTD. versus COMMISSIONER OF INCOME TAX Civil Appeals Nos. 4632 and 4633 of 1992, decided on 16th April, 1999. (Appeal by special 'leave from the and order dated April 12, 1991, of the Delhi High Court in Income Tax References Nos.87 and 88 of 1974). Income-tax--- ----Income---Diversion of income by overriding title---Agreement to sell factories situated in Pakistan in July, 1962---Supplemental agreement in November, 1962---Agreement specifying that profit and loss during period subsequent to 30-9-1962, would belong to purchaser in the event of completion of sale agreement--Sale completed on 30-9-1964---Profits arising in accounting years relevant to assessment years 1964-65 and 1965-66 were diverted by overriding title to purchaser---Section 60 was not applicable--­Profits were not assessable in the hands of vendor-assessee---Indian Income Tax Act, 1961---[Dalmia Cement Ltd. v. CIT (1991) 191 ITR 331 reversed]. The assessee-company, the owner of two cement factories situated in Pakistan, by an agreement in writing, dated July 24; 1962, agreed to sell and transfer to one M, its properties and assets in Pakistan represented in the two cement factories. Subsequent to the agreement, the parties entered into a supplemental agreement in November, 1962. It substituted a new clause 2 for the one in the original agreement. The new clause 2 laid down that "the profit and loss arising from the operations of the company during the period subsequent to September 30, 1962, shall, in the event of the completion of the sale transaction in accordance with .the said agreement, be to the account of M. The operations of the company's factories and business in Pakistan shall, however, continue to remain under the full and undisturbed control and direction of the company as hitherto. "The principal agreement had a time limit but the same by consent of the parties and by way of supplemental agreement was extended from time to time and the period of completion of the purchase was extended till September 30, 1964, and on that date the parties entered into a sale-deed…

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