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Issues:
1. Calculation of profits under section 41(2) of the Income-tax Act, 1961. 2. Taxation of sum of Rs. 67,012 as capital gain or profit under section 41(2) of the Act. Analysis: The case involves the assessment of taxable income for the assessment year 1966-67 of an assessee, formerly known as Delta Jute Mills Co. Ltd., which had undergone name changes. The Income-tax Officer included sums as profits under section 41(2) of the Income-tax Act, 1961, without proper justification. The Appellate Assistant Commissioner allowed depreciation based on actual cost rather than written down value, leading to a recalculation. It was determined that the surplus from the sale of assets not used in business would be capital gains, not profit under section 41(2). The appeal was allowed, and a fresh assessment was directed. The Revenue appealed to the Income-tax Appellate Tribunal, which upheld the decision based on the assets' book value and the non-applicability of section 41(2) due to assets not being used in business. The Tribunal referred questions of law to the High Court, including the adoption of written down value for profit calculation and the taxation of the sum of Rs. 67,012 as capital gain or profit under section 41(2). During the hearing, a previous case involving the same assessee was cited, highlighting the application of relevant sections of the Income-tax Act. The High Court declined to answer the first question and remanded it to the Tribunal for reconsideration based on the statute in effect during the assessment year. For the second question, the Court emphasized the need to ascertain if depreciation was allowed on the assets sold post-amalgamation to determine the tax treatment of the proceeds. The matter was remanded to the Tribunal for further examination. In conclusion, the High Court remanded both questions to the Tribunal for a detailed assessment based on the applicable provisions of the Income-tax Act, emphasizing the importance of considering depreciation allowance and actual asset usage in determining taxable profits or capital gains. The judgment was concluded with no order as to costs. This detailed analysis outlines the complexities of the case, focusing on the proper application of tax laws and the need for thorough examination of asset valuation and usage for accurate tax assessment.
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