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Issues:
1. Tax liability on profit from the sale of machinery under s. 10(2A) or the second proviso to s. 10(2)(vii) of the Indian I.T. Act, 1922. 2. Determination of whether the machinery was used for business in the year of sale, 1959. Analysis: The case involved two questions referred by the revenue regarding the taxability of profits from the sale of machinery by the assessee for the accounting year 1959. The first question was whether the profit of Rs. 29,364 from the sale of machinery should be taxed under s. 10(2A) or the second proviso to s. 10(2)(vii) of the Indian I.T. Act, 1922. The Tribunal initially declined to refer the second question but later included it. The assessee claimed that the machinery sold was discarded in 1958 or earlier, hence not taxable under the second proviso to s. 10(2)(vii). The ITO taxed the amount under s. 10(2A), but the AAC and Tribunal held that it did not fall under s. 10(2A) or the second proviso to s. 10(2)(vii). Regarding the first part of the first question, the court relied on a previous decision to conclude that the profit from the sale of machinery could not be taxed under s. 10(2A) as it was not related to previous depreciation losses. For the second part of the first question and the second question, the focus was on whether there was evidence that the machinery sold was not used for business in 1959. The Tribunal considered statements from the assessee's chartered accountants and a letter indicating that the machinery was not in use during the year of sale. The court found that there was sufficient evidence for the Tribunal to determine that the machinery was discarded before 1959, making it ineligible for taxation under the second proviso to s. 10(2)(vii). Conclusively, the court answered both parts of the first question in the negative, in favor of the assessee, and affirmed that the machinery was not used for business in 1959, leading to a ruling in favor of the assessee. The revenue was directed to pay the costs of the assessee.
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