Law:

Section:

Section 41(2) of the Income-tax Act 1961 - Balancing charge - Assessment year 1974-75 - Assessee a publishing house had two branches - It sold those two branches with all assets and liabilities - Tribunal found that entire business activity of each branch was a going concern which was sold for slump price -Tribunal accordingly held that no addition could be made in hands of assessee under section 41(2) as profit arising on sale of two branches - Whether, on facts, order passed by Tribunal was correct and, thus, Tribunal rightly held that no question of law arose out of its order - Held, yes FACTS The assessee, a publishing house had two branches at different places. Those two branches along with all assets and liabilities were sold to two different co-operative societies. The assets included building, machinery, furniture, fixtures, loans and advances to the staff, stock, security deposit, goodwill, etc. and the liabilities included loans, unpaid bonus and wages, outstanding liabilities, etc. while assessing the income the ITO added certain amount as profit arising on the aforesaid sale of the two branches under section 41(2). The commissioner confirmed the said addition. The Tribunal came to the conclusion that the entire business activity of each branch was a going concern which was sold for a slump price and, hence, section 41(2) was not attracted. The Tribunal further rejected the revenue's application made under section 256(1). On application under section 256(2) : HELD As a matter of pure principle, even a branch of a publishing house can have different goodwill which depends upon a host of factors such as popularity, performance, circulation, pecularities of the region, etc. A mere look at the agreements would clearly indicate that what was sold was the entire branch business as a whole-lock, stock and barrel. Several items were such as would not be independently, purchased. The value of the liabilities was adjusted against the value of assets. An inventory had to be made for the purpose of identification, because inventory was made and the value was indicated against each item and the overwhelmning character of the transaction was not changed. The…

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