1975 (7) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sale of plant and machinery took place before the previous year.
2. Whether the sale of mines and mining rights amounted to a venture in the nature of trade or a trading transaction.
3. Whether any profit was earned by the assessee-company as a result of the said sale.

Summary:

Issue 1: Sale of Plant and Machinery Before the Previous Year
The Tribunal concluded that the sale of plant and machinery to M/s. Kariatari Mica Mining Co. Ltd. took place before the previous year, excluding Rs. 52,778 from the assessee's total income. However, the High Court found that the Tribunal misdirected itself in law by not considering the substantive evidence and the admission by the assessee's counsel that the sale was completed on January 4, 1957. The High Court held that there was no material to justify the Tribunal's conclusion that the sale took place before the previous year.

Issue 2: Venture in the Nature of Trade
The Tribunal held that the sale of mines and mining rights did not amount to a venture in the nature of trade or a trading transaction, thus excluding Rs. 4,21,023 from the assessee's total income. The High Court, however, found that the Tribunal failed to consider essential and relevant facts found by the tax officer, such as the antecedents and intentions of the promoters and the organized operations characteristic of ordinary trading. The High Court concluded that these transactions were out and out business transactions or ventures in the nature of trade.

Issue 3: Profit Earned by the Assessee-Company
The Tribunal concluded that no profit was earned by the assessee-company as a result of the transfer, based on the decisions in Rogers & Co. v. Commissioner of Income-tax and Commissioner of Income-tax v. Mugneeram Bangur & Co. The High Court noted that these decisions were disapproved by the Supreme Court in Commissioner of Income-tax v. B. M. Kharwar, which held that the excess over the written down value of the machinery is liable to be brought to tax u/s 10(2)(vii) of the Indian Income-tax Act, 1922. Consequently, the High Court held that the Tribunal's conclusion was erroneous in law.

Conclusion:
The High Court answered all the questions in the negative and in favor of the revenue, indicating that the Tribunal had erred in its conclusions. The assessee was ordered to pay the costs of the reference to the revenue.