M/S GUZDAR KAJORA COAL-MINES LTD. CALCUTTA versus ILIE COMMISSIONER OF INCOME TAX, CALCUTTA

Citation: [1973] 1 S.C.R. 742 · Decided: 31-07-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

742 
M/S GUZDAR KAJORA COAL-1\U~"'ES LTD. CALCUTTA 
A. 
v. 
IlIE COMMISSIONER OF INCOME TAX, CALCUTTA 
July 31, 1972 
' 
!K. · S. HEGDE, A.. N. GROVER AND D. G. PALEKAR, JJ.] 
Income Tax Act (11 of 1922), ss. 
10(2) (vi) and 10(5)-'0riginal 
cost to ossessee', meaninJ! of-Polver of Reveriue Authorities to go behind 
1he valuation and allocation in sale _deed. 
The appellant ·purchased on July 1. 1945, the property of a colliery 
company and the consideration of Rs. 6 lacs was allocated in the sale deed 
in a certain manner among the various items purchased. From the assess-
c 
ment year 
1946-47 
to 
the 
assessment year 1952-53; the 
appellant. 
claimed depreciation 
on the 
basis of the 
written down value of the 
· a.!isets as per the assessment 
record of the vendor-company, 
and' the 
· Income-tax officer allowed depreciation on that basis. 
For the assess-
ment year 1952-53, however·, the appellant contended that the deprecia-
tion should have been \\-'Orked out on 'the basis of balance-sheet valuation 
of the assets as per the -audited accounts submitted by the appellant and 
as claimed in their return. 
The Appellate Assistant" Commissioner heJd 
J> 
- against the appellant. 
· 
On appeal, the appellate Tribunal remanded the matter to the Income· 
tax Officer, and the Income-tax Officer. after inquiry, held that some of 
the directors of the vendor company and the appe1Iant \Vere the same, that 
the valuation of the depreciabJc assets had been written up while that of 
the non-depreciable assets was written down and that no provision was 
made for the goodwill of the vendor company even though it \Vas making 
good profits. He made the allocation of Rs. 6 lacs 
in 
a 
different 
manner, and included the goo<l\1,..jJI of the vendor also as having 
been 
/ sold to the appellant, and made provisionjor it from out of the Rs. 6 lacs. 
The Tribunal accepted the report of the; Income-tax Officer and held that 
when the settled practice was sought to be reovcned by the appellant the 
Income-tax Officer had a right to see whether there was any justification 
'for the departure, that the break up of the valuation in the safe deed was 
in fact arbitrary and that it \Vas unlikely that the goodwill was provided 
for in the break un of the valuation in the safe deed. 
' 
On reference, the High Court also held th'11, the Income-tax Officer 
1,vas competent to go beyond the conveyance and refix the valuation and 
that 
he 
had 
cbrrectlv \\-'orked out the valuation of the good\\'iJl after 
examining all the relevant facts and reports of experts and that the method 
adopted was not challenged by the appellant. 
Dismissing the appeal to this _Court, 
E: 
F 
G 
HELD : In the case of an asset, other than ocean-going ships, with 
regard to 'vhich depreciation allowance is c:a,imed under s. 10(2) (vi) of 
the Income-tax Act, 1922, in view of s. 10(5), the original actual costto 
an assessee of the asset has to be ascertained for the purpose of finding 
oUt its written down value. For the purpose of getting the benefit of 
II 
cl. (c) of the proviso 
to s. 10(2)(vi) 
also 
the original cost to the 
assessee, that is t.he person who owns tile asset and who is being assessed, 
has to be ascerta1ned. 
[748F-HJ 
. ' 
.. 
. 
• 
A 
ll 
c 
D 
F 
G 
II 
GUZDAR COAL MINES LTD. v. C.I.T. (Grover, J.) 
743 
The original cost of a particular asset is a question of fact which ha.> 
to re determined on the evidence or on the material produced before or 
available to the Income-tax authorities. 
Any document or ·formal deed 
mentioning the consideration 
or 
the cost paid for the purchase of an 
asset by an assessee v,iou?d 
be a piece of evidence ~nd prima facie the 
st<1tcn1ents or figures given therein show how much the cost of the asset 
to the assessee is. 
But if circumstances exist showing 
that a fictitious 
price has been put on the asset or there is fraud or collusion between the 
vendor and the vendee and there has been infiation or deflation of value 
for ulterior purposes it is open to the Income~tax authorities to refuse to 
accept the price mentioned in the deed or alleged by the assessee and to 
ascertain what the actual original cost was. 
[749C-El 
Even if it is not expressly mentioned that goodwill has been sold it 
can he shown and ascertained by evidence whether it has been purchased 
or not hy the assessec. 
[749F-Gl 
Conunissioner of Jnconze Tax, Madras v. The Buckinghanz & l~arnatic 
c.1. Lui. Madras, 11935] I.T.R. 384; lo1

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