THE COMMISSIONER OF INCOME-TAX, BOMBAY CIRCLE II versus THE NATIONAL SYNDICATE, BOMBAY.

Citation: [1961] 2 S.C.R. 229 · Decided: 01-11-1960 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed

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

Judgment (excerpt)

2 S.C.R. SUPREME COURT REPORTS 
229 
THE COMMISSIONER OF INCOME-TAX, 
BOMBAY CIRCLE II 
v. 
THE NATIONAL SYNDICATE, BOMBAY. 
(S. K. DAs, M. HrnAYATULL.AH and J. C. SHAH, JJ.) 
Income- ~·ax-Business carried out for a part of the year-Com-
putation-If must be for the whole year-Indian Income-Tax Act, 
1922 (II of 1922) s. 10(2)(vii). 
The National Syndicate, a Bombay firm, acquired on Janu-
ary 'n, 1945· a tailoring business as a going concern for 
Rs. 89,321 which included the consideration paid for sewing 
machines and a motor lorry. Soon after the purchase the res-
pondent found it difficult to continue the business, therefore it 
closed its business in August, 1945. Between August 16, 1945. 
and February 14, 1946, sewing machines and the motor lorry 
were sold at a loss. 
The respondent closed its account books 
on February 28, 1946, showing the two losses and writing them 
off. 
For the assessment year 1946-47, the respondent claimed a 
deduction under s. l0(2)(vii) of the Indian Income Tax Act. The 
Appellate Tribunal held that the sales of machines and the 
motor lorry were made in the course of the winding up of the 
~ 
asse·ssee's business after the business had been stopped and that, 
therefore, the deduction could not be claimed under s. ro(2)(vii). 
Respondent moved the High Court and obtained an order under 
s. 66(2) of the Income-Tax Aet, and the following two questions 
were referred:-
" (r) Whether the Tribunal was justified in law in holding 
that the petitioner had carried on its business only till twenty-
eigth day of August, One Thousand Nine Hundred and Forty 
F~? 
. 
(2) Whether on the facts and circumstances of the case, the 
Income Tax Appellate Tribunal was justified in law in not 
allowing the sum of Rs. 41,998 (Rupees forty-one thousand nine 
hundred and ninety eight) on sale of machines and Rs. 3,700 
" 
(Rupees three thousand and seven hundred) on the sale of lorry 
as a deduction from the total income of the applicant ?" 
The High Court answered the first questiqn in the affirma-
tive, and the second question in the negative. 
The Commissioner of Income-tax questioned the finding of 
.. 
the High Court and came up in appeal by special leave and con-
< 
tended that an allowance could only be claimed if sale of 
machines, etc. took place when the business was being continued 
and not if the business had come to a close. The respondent on 
the other hand submitted that s. io(2)(vii) would be applicable 
... Y ove111ber 
I. 
230 
SUPREME COURT REPORTS 
[1961] 
r960 
in a case where the business continued for a part of the account 
year, even though the sale of machinery, plant, etc. took place 
The Commissione, after the closure of the business during the course of the account 
of Jn,ome-tax. year. 
Bombay Ci"le I I 
Held, that if the profits or gains of a business for a parti-
v. . 
cular year are to be taxed, they must be computed for the whole 
Th~ l•lational 
year taking into account losses incurred during the same year, 
Synd"ate, Bombay provided that the business had been "carried on by the asses-
see" ; the building, machinery or plant had been " used for the 
purpose of the business"; the sale etc. had taken place during 
the year of account, and the Joss had been brought into the books 
of the assessee and written off. There is no other condition to 
be found expressly in the section or i~ the Act. It is nowhere 
stated that the business of the assessee should have been carried 
on for the whole year, or that the machinery or plant should 
have been used for the whole of the accounting period. There are 
no words which would show that, if the assessee worked only 
for a part of the year and then sold out, the loss that he incur-
red was not a business loss, or that he must pay tax on the 
small profit that he might have made, and bear the loss in addi-
tion. 
The Liquidators of Pursa Limited v. Commissioner of Income-
Tax, Bihar, [1954] S.C.R. 767, Commissioner of Income-tax v. 
Express Newspapers Ltd. (1960) 40 I.T.R. 38, distinguished. 
Indian Iron & Steel Co., Ltd. v. Commissioner of Income-
tax, Bengal, (1943) II I.T.R. 328, Commissioner of Income-tax v. 
Shaw Wallace & Co., Ltd., (1932) L.R. 59 I.A. 206, referred to. 
C:!vIL APPELLATE JURISDICTION: 
Civil Appeal 
1 
No. 280 of 1959. 
Hidayatullah ]. 
Appeal by special leave from the judgment and 
order dated the 22nd August, 1956, of the former Bom-
bay High Court in Income-tax Reference No. 17 of 
1956. 
. 
R. Ganapa!hy Iyer and

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