COMMISSIONER OF INCOME TAX versus MUGNEERAM BANGUR & CO.

Citation: [1965] 3 S.C.R. 611 · Decided: 31-03-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Judgment (excerpt)

, 
A 
COMMISSIONER OF INCOME TAX 
v. 
MUGNEERAM BANGUR & CO. 
March 31, 1965 
[K. SUBBA RAO, J. C. SHAH AND S'. M. S!KRI, JJ .] 
Income-tax Act (11 of 1922)-Sale of going concern-Slump price 
B 
-When part attributable to stock-in-trade. 
a 
D 
E 
F 
G 
The business of the assessee firm, carrying on land development 
business was sold as a going concern to a company· promoted by the 
assessee ::; partners. The purchase price included sums for th.e val':1e 
of land, goodwill, etc. The amount shown as the valuie of th.e goodWlll 
\?as sought to be aseessed to income-tax on the grounds (1) that the 
assessee's business was purely one of buying and selling land and (ii) 
the amount was profit attributable to the sale of land which was 
the stock-in-trade of the assessee. In appeal to this Court. 
HELD: On the facts of this case it could not be said that the 
£ssessees were carrying on the business of l)Urely buying and selling 
land. They were engaged in buying land, developing it and then 
selling it. The sale was the sale of the whole concern and no part of 
the slump price was attributable to the cost of the land. If that was 
so, no part of it was taxoble. [617H-618A, E] 
Commissioner of Income-tax, Kerala v. We.st Coast Chemical and 
Industries Ltd. 46 IT.R. 135 and Doughty v. Commissioner of Taxes 
(1927) A.C. 327, applied. 
In the case of a concern carrying on the business of buying land, 
developing it a-·! the selLing it, it is easy to distinguish a realisation 
sale from an ordinarv sale. and it is verv difficult to attribute part of 
the slump price to the cost of land sold in the realisation sale. The 
mer~ fact that in the schedule the price of land was stated did not 
lead to the conclusion that part of the slump price was necessarily 
attributable to the land sold. There was no evidence that any attempt 
was made to evaluate the land on the date of sale. As the assessees 
\Vere transferring the concern to a company, c0nstituted by the asses-
sees themselves, no effort would ordinarily have been made to 
evaluate the land as on the date of sale. r618B-D] 
CIVIL APPELLATE JURISDICTION:' Civil Appeal No. 310of1964. 
Appeal by special leave from the judgment and order dated 
December 13, 1961 of the Calcutta High· Court in Income-tax 
Reference No. 7 4 of 1956. 
N. D. K arkhanis, Go pal Singh and R. N. Sachthey, for the 
appellant. 
A. V. Viswanatha Sastri, S. Murthy and B. P. Maheshwari, 
for the respondent. 
B 
The Judgment of the Court was delivered by 
Sikri, J. 
This is an aopeal by special leave directed against 
the jud~ment of the High Court at Calcutta in a reference under 
• 
611 
612 
SUPREME COURT REPORTS 
[1965] 3 S.C.R, 
s. 66 of the Income Tax Act. The four questions referred to the 
High Court by the Income Tax Appellate Tribunal are: 
"(!) Whether on the facts and circumstances of this case the 
Income-tax Officer, Centra:l Circle XIV, Calcutta, was 
competent to file the appeal before the Tribunal against 
the order of the Appellate Assistant Commissioner of 
Income Tax, Range-A, Calcutta? 
(2) Whether on the facts and circumstances of this case the 
sum of Rs. 2,50,000 represented the surplus on the sale 
of lands which was the stock in trade of the assessee 
company or was the value of goodwill alleged to have 
been transferred? 
(3) Whether on the fac.ts and circumstances of this case by 
the sale of the whole business concern it could be held. 
that there was taxable profit in the sum of Rs. 2,50,000? 
(4) Whether on the facts and circumstances of this case 
and fo view of the findings of the Tribunal that the 
entire share capital of the vendee company (except-
ing seven ordinalry shares) was taken over by the 
vendOF firm in lieu of the sale price of the business 
as a whole, there was any profit in the amount of 
Rs. 2,50,000 the same being taxable und~r the Indian 
Income Tax Act? 
The relevant facts and circumstances are these. The respon-
dent, MI s Mugneeram Bangur & Co. (Land Department) Calcutta 
(hereinafter referred to as the vendors) were a firm carrying on 
the business of land development in Calcutta. By an agreement 
dated July 7, 1948, the partners of the firm agreed to sen all 
the business of the said firm to the Amalgamated Development 
Limited, hereinafter called the vendee, which company was pro-
moted by the partners of the firm. The relevant paragraphs of the 
said agreement are as fonows : 
"And Whereas the Vendors have agreed to sen and the 
company has agreed to 

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