9911796707
|
Home
Issues Involved:
1. Taxability of profits under section 10(2)(vii) of the Income-tax Act. 2. Interpretation of the term "used" in the context of section 10(2)(vii). 3. Applicability of the second proviso to section 10(2)(vii). Detailed Analysis: 1. Taxability of Profits Under Section 10(2)(vii) of the Income-tax Act: The primary issue was whether the profits of Rs. 2,994 and Rs. 2,997 from the sale of two motor trucks could be taxed under section 10(2)(vii) of the Income-tax Act. The assessee, a registered firm engaged in the business of plying motor trucks and lorries on hire, sold two trucks on January 1, 1946, realizing profits of Rs. 2,994 and Rs. 2,997 respectively. The Income-tax Officer included these profits in the assessee's total income for the assessment year 1947-48, applying the provisions of section 10(2)(vii) read with the second proviso. The assessee contended that the second proviso was inapplicable because the trucks were sold on the first day of the previous year and could not be said to have been used during that year. 2. Interpretation of the Term "Used" in the Context of Section 10(2)(vii): The court examined the meaning of "used" within the context of section 10(2)(vii). It was determined that the term "used" includes both active and passive use. The court cited various precedents, including Commissioner of Income-tax v. Viswanath Bhaskar Sathe [1937] 5 I.T.R. 621 and Liquidators of Pursa Ltd. v. Commissioner of Income-tax [1954] 25 I.T.R. 265, to support the interpretation that machinery or plant need not be in active use at the time of sale to be considered "used" for business purposes. The court concluded that the trucks, although sold on the first day of the previous year, were in a condition fit for use and thus could be considered as "used" during that year. 3. Applicability of the Second Proviso to Section 10(2)(vii): The second proviso to section 10(2)(vii) states that if the sale amount exceeds the written down value, the excess amount, up to the difference between the original cost and the written down value, shall be deemed as profits of the previous year in which the sale took place. The court noted that the difference between the original cost and the written down values of the trucks was greater than the profits realized from the sale. Therefore, the entire profit from the sale was taxable under this proviso. The court rejected the assessee's argument that the trucks were not "used" during the previous year, affirming that the trucks were in use up to the midnight of December 31, 1945, and were available for use on January 1, 1946, until they were sold. Conclusion: The court concluded that section 10(2)(vii) and its second proviso were applicable in this case, and the profits from the sale of the trucks were taxable. The question referred to the court was answered in the affirmative, and the assessee was directed to pay the costs of the reference to the Commissioner of Income-tax, assessed at Rs. 200. Judgment: The court, comprising M. C. Desai (CJ) and Brijlal Gupta, JJ., delivered a unanimous judgment. The question was answered in the affirmative, and the judgment was directed to be sent to the Income-tax Appellate Tribunal under the seal of the court and the signature of the Registrar, as required by section 66(5) of the Income-tax Act.
|
