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Issues Involved:
1. Validity of the assessment made by the Income-tax Officer on February 28, 1950. 2. Validity of the notice issued under section 34(1) of the Act on April 4, 1951. 3. Validity of the assessment made by the Income-tax Officer on July 17, 1951. 4. Whether the Free Press Company made a business profit of Rs. 2,14,090 under the proviso to section 10(2)(vii) of the Act. 5. Whether the capital gain of Rs. 3,94,576 is not liable to tax in view of the third proviso to section 12B(1) of the Act. 6. Whether the capital gain made by the Free Press Company is liable to be assessed in the hands of the Express Company under section 26(2) of the Act. Issue-wise Detailed Analysis: 1. Validity of the Assessment Made by the Income-tax Officer on February 28, 1950: The court examined whether the assessment made on February 28, 1950, was valid given that the Free Press Company was in liquidation and had ceased to exist. The court found that the return filed by Mr. Ramnath Goenka on behalf of the Free Press Company was unauthorized as he had no power to act on behalf of the defunct company. The assessment was thus deemed invalid as there was no valid return to support it. Consequently, the court answered this question in the negative, indicating the assessment was not valid in law. 2. Validity of the Notice Issued Under Section 34(1) of the Act on April 4, 1951: The court considered whether the notice issued under section 34(1) was valid. Given that the Free Press Company had been struck off the register and could not be found, the court held that the Income-tax Officer had jurisdiction to initiate proceedings under section 34 read with section 26(2) against the successor, the Express Company. The court answered this question in the affirmative, validating the notice issued on April 4, 1951. 3. Validity of the Assessment Made by the Income-tax Officer on July 17, 1951: The court addressed the validity of the assessment made on July 17, 1951. Since the Free Press Company had ceased to exist, the court found that the assessment should have been made on the successor, the Express Company, as mandated by section 26(2). The court affirmed the validity of this assessment, answering the question in the affirmative. 4. Whether the Free Press Company Made a Business Profit of Rs. 2,14,090 Under the Proviso to Section 10(2)(vii) of the Act: The court examined whether the profit of Rs. 2,14,090, which represented the difference between the written-down value and the original cost price of the machinery, was business income under the proviso to section 10(2)(vii). The court concluded that the sale of the machinery was part of the process of winding up the Free Press Company and not an operation in furtherance of its business. Therefore, the profit could not be considered business income. The court answered this question in the negative. 5. Whether the Capital Gain of Rs. 3,94,576 is Not Liable to Tax in View of the Third Proviso to Section 12B(1) of the Act: The court considered whether the capital gain of Rs. 3,94,576 was liable to tax under section 12B. The court held that the capital gain made by the Free Press Company was not liable to be taxed as business income under section 26(2), as it was not part of the income, profits, and gains of the business transferred. The court answered this question in the affirmative, indicating the capital gain was not liable to tax. 6. Whether the Capital Gain Made by the Free Press Company is Liable to be Assessed in the Hands of the Express Company Under Section 26(2) of the Act: The court addressed whether the capital gain could be assessed in the hands of the Express Company. It concluded that the capital gain could not be considered as profits from business, profession, or vocation under section 26(2). The successor company would not be liable to be taxed on the capital gains made by the predecessor. The court answered this question in the negative. Conclusion: The court provided detailed answers to each of the six questions, addressing the validity of assessments, notices, and the taxability of business profits and capital gains. The court's analysis emphasized the legal principles governing the succession of business and the specific provisions of the Income-tax Act applicable to the case.
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