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 1958-59 - Assessee was carrying on ice manufacturing business - During previous year he did not carry on business and sold all plant & machinery - Whether surplus arising from sale of plant & machinery over written down value would not be taxable under section 10(2)(vii) of Act, 1922 as deemed income of assessee - Held, yes FACTS The assessee, manufacturer was carrying on ice manufacturing business. During the previous year he did not carry on his business and sold the plant & machinery. However the ITO assessed the surplus of sale price over the written down value of plant & machinery under section 10(2)(viii) of the Act 1922. The AAC upheld the order of the ITO. On appeal the Tribunal also upheld that order. On reference:- HELD The finding of fact given by the Tribunal was that the business was not carried on during the previous year and this finding of fact had been accepted by the revenue. The issue of the instant case stood concluded by a decision of the Supreme Court in CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC), where it had been laid down that, notwithstanding the second proviso to section 10(2)(vii) of the Act 1922 as amended in 1949, the profit from the sale of the assets could not be taxed because the proviso did not warrant the assumption of the legal fiction that during the calendar year when the sale took place the company should be deemed to be carrying on business. Therefore, the surplus arising from the sale of plant and machinery of ice factory was not…

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