LexCOMMISSIONER OF INCOME-TAX, KERALA versus K. B. KALIKUTTY AND ANR.
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• • 531 A COMMISSIONER OF INCOME-TAX, KERALA v. K. B. KALIKUTTY AND ANR. August 2, 1968 B (J. ·c. SHAH, V. RAMASWAM! AND A. N. GROVER, JJ.] c D Income Tax Act, 1922, s. 10(2)(vii), second proviso-as amended by Act 67 of 1949-Scope of. The assessee was running a business of plying buses and during its previous year ending on August 16, 1959, the buses h:lli been plied for part of the year but were sold the~eafter. The Income-tax. Offic~r assessed the difference between the sale pnce Of the buses and their written down value to tax as profit under the second proviso to s. 10(2)(vii). In appeal, the Appellate Assistant Commissioner rejected the assessee's con- tention that the business had been transferred as a whole and therefore the profit in question could not be taxed. The Tribunal also dismissed an appeal taking the view that the buses had been plied by the assessee for part df the previous year and the profit on the sale of these buses was taxable under the said provision. However, the High Cou'ft, upon a reference, held that the amount ·in question was not assessable as pro.fit under s. 10(2) (vii) on the assumption that the whole of the bus service business. had been wound up during the relevant period. On appeal to this Court. HELD : allowing the appeal : E Even on the assumption that the sale of the buses was a closing down F G H or a realization sale it would nonetheless be taxable since the sale was made after the amendment of the second proviso to s. 10(2) (vii) by Act 67 of 1949. [533 F-0] According to the law laid down by this Court the view of the High Court would have been sustainable if the sale in the present case had been effected during the assessment year prior to the amendment o'f the proviso by Act 67 of 1949. The critical words which were inserted by that pro- viso namely, "whether during the continuance of the busines·s or after the cessation thereof', must be given their proper meaning. It is quite plain that if the building, machinery or plant is sold during the conti- nuance of the 'business or after the business ceases, the sale proceeds would be liable to tax in accordance with the pro:viso. When the legislature clearly provided that the proviso would apply even if the sale was made after the cessation Qlf the busineS"s, it is difficult to conceive that it was intended to exclude from the ambit of the proviso a sale made for the purpose C\f closing down the business or effecting its cessation. [535 F-H] Commissioner of Income-tax, Madras v. Express Newspapers Ltd., Madras, f1964] 8 S.C.R. 189, 195; Commissioner of Income-tax, Kera/a v. West Coast Chemicals and lndus·tries Ltd., 46 I.T.R. 135; Co1n1nissioner of Inr:ome-tax, Kera/a v. R. R. Ramakrishna Pillai, 66 I.T.R. 725 and The Liquidators of Pursa Limited v. Commissioner of Income-tax, Bihar, [1954], S.C.R. 767; distinguished. Commissioner of Income-tax v. Ajax Products Ltd., [1965] 1 S.C.R. 700; referred to. Ll3Sup.Cl/68-3 532 SUPRE:ME COURT REPORTS [ 1969] I S.C.R. Civ1L APPELLATE JuR1smcnoK :· Civil Appeal No. 714 of A 1966. Appeal by special leave from the judgment and order, dated September 17, 1964 of the Kerala High Court in Income-tax Referred Case No. 62 of 1963. R. N. Sachtlury, T. A. Ramachandran and R. D. Sharma, for the appellanL C. S. Venkateswara Tyer, Sardar Bahadur Saharya and Yougin- dra Khusa/ani, for respondent No. 2. The Judgment of the Court was delivered by B Grover, J. The sole question for determination in this appeal c by special leave is whether on a true interpretation and construc- tion of the second proviso to s. 10 ( 2) (vii) of the Income Tax Act 1922, sale of the assets of an assessce effected for the purpose of closing down the business would be covered by that proviso and would be assessable as profit. The assessee was running the business of plying buses in the D name of Kumar Motor Service. During the assesscc's previous year which was the year ending August 16, 1959 the buses had been plied for part of the year but they were sold between August 16, 1958 and January 13, 1959. Two of the buses had been sold for Rs. 78,000 and the other four for Rs. 35,000, the total con- sideration received being Rs. 1,13,000. The assessee claimed a E payment of Rs. 2,000 a~ brokerage. The Income Tax Officer fixed a sum of Rs. 25,000 as the route value and held this amount to be a capital gain assessable to tax. On the bala
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