Law:

Section:

Section 41(2) of the Income-tax Act, 1961 [Corresponding to section 10(2)(vii) of the Indian Income-tax Act, 1922] - Balancing charge - Assessment year 1952-53 - On 21-3-1952, under an order made under section 11(4) of Indian Companies Act, 1913, name of company 'P' was changed and appellant/assessee-company was formed - On same day, a new company 'P' was incorporated - By a written agreement, assessee-company agreed to transfer its assets and liabilities to company 'P' in consideration of allotment of shares - Original cost of one building described in second schedule was Rs. 97,258 whereas its written down value was Rs. 57,011 - Assessee-company valued building at Rs. 2,24,673 i.e. price at which it was agreed to be sold to company 'P' - ITO brought to tax difference between original cost and written down value of building on date of transfer as deemed profit of assessee-company under second proviso to section 10(2)(vii) of 1922 Act - High Court affirmed ITO's decision - Whether, since, assessee-company sold building in second schedule for a stated consideration which was not shown to be notional, and since consideration was in excess of original cost of building, difference was profit within meaning of section 10(2)(vii), second proviso of 1922 Act - Held, yes FACTS Company 'P' was registered as private limited company on 30-9-1939 to carry on business of clothiers and tailors. On 21-3-1952, under an order made under section 11(4) of the Indian Companies Act, 1913, the name of company 'P' was changed and appellant/assessee-company was formed. On the same day a new company i.e.,company 'P' was incorporated. By a written agreement also of the same date the appellant-company agreed to transfer its assets and liabilities to company 'P', in consideration of allotment of shares. Under the terms of the agreement, the appellant-company purported to transfer seven items of property described in the Schedule annexed to the deed; one of the properties so agreed to be transferred was described in the second schedule-a building. No deed of conveyance was executed in pursuance of the agreement. It was, however, common ground that on 1-7-1952, company 'P', took over…

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