ALAPATI VENKATARAMIAU versus COMMISSIONER OF INCOME TAX HYDERABAD

Citation: [1965] 3 S.C.R. 567 · Decided: 29-03-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
ALAPATIVENKATARAMIAU 
v. 
COMMISSIONER OF INCOME '!'AX HYDERABAD 
March 29, 1965 
[K. SUBBA RAO, J. c. SHAH .AND S.M. Sucru, JJ.) 
Indian Income-tax Act, 1922 (11 of 1922), s. 12B-Capital Gains--
Passing of Title-What constitutes-Date of sale or transfer -What is. 
On 17th March 1948, the assessee entered into an agreement to 
sell his factory to a company, and on the very same day possession 
of all the assets of the factory was handed over to the company. A 
few days later an entry was made in the company's account showing 
that a sum of Rs. 2,00,000/- had be€n paid to the assessee and there 
were corresponding entries in the assessee's accounts also. In fact 
only a lakh and odd was paid to the asS<Ossee and even that amount 
was paid only in Ma:·ch 1949. ;n November 1948 a sale deed was 
executed and registered and in March 1949 the Board of Directors 
of the Company ratified the sale. For the assessment year 1948-49, the 
assessee had included in his return, the sum of Rs. 2 lakhs as capital 
gains. The Income-tax Officer held that the assessee realised an excess 
of Rs. 79,494/- over and above the original cost, as capital gains asses-
sable under s. 12B of the Income-tax Act, 1922. The Appellate Assis-
tant Commissioner, and the Tribunal confirmed the order. In refe-
rence, the High Court held that it was immaterial as to when the 
money was actually paid because the transfer had already been made 
to the company by possession, that for the purpose of the section the 
assessee should have the right to receive the profits and not that he 
should have in fact received it, that entire property was transferred 
by giving possession to the company in the year of account, and that 
the income had arisen to the assessee in the year of account. In appeal 
to this Court, it was contended that as the sale took place only in 
March 1949, when the Directors ratified the agreement of sale, no 
sale or transfer took place before 1st April 1948, as required by 
s. 12B, and hence the amount was not liable to tax. 
HELD: Title to the assets could not pass to the company till the 
conv:eyance was executed and registered and consequently no sale, in 
the mstant case, took place of the assets before 1st April 1948 as re-
quired by s. 12B. [574B] 
Commissioner of Income·ta.x v. Bhuranoya Coal Co. 34 I.T.R 802, 
referred to. 
Before s. 12B can be attracted, title must pass to the company by 
any of the modes mentioned in s. 12B i.e., sale, exchange or transfer. 
It is true that the word 'transfer' is used in addition to the word 
'sale' but even sO, in the context, transfer must mean effective con-
veyance of the capital asset to the transferee. Delivery of possession 
of immovable property cannot by itself be treated as equivalent to 
conveyance of the immovable property. [574E] 
The date of sale or transfer according to s. 12B is the date when 
the sale or transfer takes place, and the entries in the account books 
are irrelevant for the purpose of determining such a date. (574F-G] 
In the present case. machinery. electrical fittings, buildings and 
site were not sold or transferred in the relevant year of account; only 
067 
~l'.J•Uf::)IF, COt:H1' RF.ro1rrs 
[Ioo:i] 3 8.C.R. 
one asset, namely, furniture was transferred on 17th Ma.-ch 1948 as 
title to furniture can pass by delivery. Capital gains, if any, made by 
the transfer of furniture accrued on that date. The position of good-
will is ho\revcr ditlcrent_ It is an intangible asset and it ordinarily 
passes along \\'ith the tn1nsference of the v..•hole business and so 
it was not transferred before !st April !948. f575A-E] 
Ov11. APPELLATE kRISDICTION: Civil Appeal No. 5 of 1964. 
Appeal by special leave from the judgment and order dated 
December I. 1961 of the Andhra Pradesh High Court in Case Re-
ferred No. 21 of 1960. 
A. V. Viswanatha Sa11ri, K. Jayaram and R. Va.mdeva Pillai 
for the appellant. 
K. N. Rajagopa/ Sastri and R. N. Sacl11hey, for the respondent. 
The Judgment of the '-ourt was delivered by 
Sikri, J. This appeal by special leave is directed against the 
judgment of the High Court of Andhra Pradesh an,wer;ng the ques-
tion referred to it under s. 66 of the Income Tax Act. 1922. against 
the appellant. The que>tion referred to was "whether on the facts 
and in the circumstances of the case a sum of Rs. 79.494!- is asses-
sable as capital gains in the assessment year 1948-49." 
A 
B 
c 
D 
The facts relevant to the question are as fol

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