LexWESTERN STATES TRADING CO. LTD. versus COMMISSIONER OF INCOME TAX, CENTRAL CALCUTTA
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A c .. D E F G H 383 WESTERN STATES TRADING CO. LTD. v. COMMISSIONER OF INCOME TAX, CENTRAL CALCUTTA January 18, 1971 [J. C. SHAH, C.J., K. S. HEGDE ANDcA. N. GROVER, JJ.J Income Tax Act 1922, s. 10(2)(vii) and: 24(2)-Appel/ant selling colliery after running it for part of the year-loss on sale written off-if allowable under s. 10(2) (vli)-Profits on shares forming part of stoc!<-in· trade of appellant's share-dealing business-Whether could be set off against business loss of previous years. The asse~ entered, into an agreement with another company on November 2'9, 1954 for the sale of its colliery. It was provided , in the agreement that pending completion of the sale or delivery of pbssession, the vendor was to carry on business on behalf of the pur~haser and .run the ro)liery as on and from September 1, 1954 on the account· and at the cost .fl( the purchaser. In the course o'f the jjppellant's assess!IJ'nt to income tax for which the accounting year was fr-Om September 1, 1954 to August 31, 1955, the Income Tax Officer, after making '3djustment for certain assets which according to him were not entitled to depreciation, worked " out the figure of loss at Rs. 11,257 .00; however he rejected a claim to set off this loss against the appellant's other income on the view that the assessee did not carry on the business of the colliery during the year since the transfer took place with ~t from September 1, 1954. The Appellate Assistant Commissioner /upheld this order and, although the Tribunal, in appeal, ·accepted the assessee's contention that it carried on busin.,.s till November 29, 1954, if did not allow the loss on the view thaJ.it had result- ed from a closing down sale. In respect of the same year, cer~li dividends on shares received by the assessee were .. included in its income unper s. 12 but i:s claim to set off this income against the loss in business for earlier yea<s brought forward, was disallowed: The High Gll>lrt, upon 11 iyference made to it, htid against the appellant on botll the~ mues. On appeal to this Court, HELD : The T•.ibunal had, in clear and unequivocal tenns, upheld the.· contention of the appellant that it had actually carried on the business till November 29, 1954. Section 10(2) (Vii) provides that profits or gains shall be computed after making the allowan~in respect of any such build_ ing, machinery or plant which had been so e,tc., the amount by which the written down value thereof exceeds the ount 'for which the building, machinery or plant is actually sold or its scrap value . The first proviso requires that such amount should actually be written off in the books of the assessee. It is difficult to see how all the conditions necessary for the allowance under the above provisions were not satisfied. The colliery business was carried on by the appellant during .p~ of the releval}t ac- counting year. The ntachinery and plant had bt!lll used for the purpose of the business. The sale of the colliery took pla'ce during the accounting year; and. the loss of Rs. 11,237.00 was written off inthe books of t,be appellant. [387 C-F] Commisrioner of Income· Tax, Bombay City II v. National Syndicate, 41 I.T .R. 225; followed. 384 SUPREME COURT IUU'ORTS [1971] 3 S.C.R. Once it is accepted that the colliery business was carried on for a part A of the relevant assessment year, the assessee would be entitled to. get a set off under s. 24(2) of the Act if the shares on account of which the divi- dendS were received formed part of the assessee's trading assets. It was not disputed that the shares formed part df the stock-in-trade of the share- dealing business of the assessee. There could be no reason, therefore, for the 3S.'lessee not being entitled to the set off claimed. [388 B-DJ C.l.T., Andhra Pradesh v. Cocanada Radhaswami Bank Ltd., 57 I.T.R. 306; Commissioner of Income Tax Madhya Pradesh v. Shrikishan Chand- mal, 60 I.T.R. 303 and Commissioner of Income Tax, Ahmedabad v. Bhavnagar Trust Corporation (P,) Ltd., 69 l.T.R. 278; 'referred to, C1v1L APPELLATE JURISDICTION : Civil Appeals Nos. 589' and 590 o.f 1967. B c Appeals by special leave from the judgment .ancl order dated May 7, 1965 of the Calcutta High Court in Income-tax Reference Nos. 183 aind 238 of 19'61. C. K. Daphtary, B. P. Maheshwari and N. R. Khaitan, for the appellant (in both the appeals). S. C. Manchanda, S. K. Aiyar, R. N. Sachthey and B. D. Sharma
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