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TMI Blog2009 (3) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 256(1) of the Income-tax Act, 1961, pertaining to the assessment year 1973-74 seeking the opinion of this court on the following question of law : "Whether the Tribunal was right in coming to the conclusion that the value of the assets taken over on amalgamation should be taken at book value as was existing in the hands of the amalgamated company for working out the cost of the shares for purposes of determining the gains or loss thereon ?" 2. Reference has been made in relation to the assessment of the year 1973-74 which was sought to be reopened by the Income-tax Officer (for short, "the ITO"), who issued notice to the assessee under section 148 of the Income-tax Act, 1961 (for short, "the Act"), on January 2, 1978. The assessee filed return on February 14, 1978. The assessment was reopened as, according to the Income-tax Officer, the assessee did not disclose true facts of its income. The assessee-company claimed loss of Rs. 48,510 on sale of shares of M/s. Baranagore Jute Factory and M/s. Equitable Coal Co. which was allowed in the original assessment. These shares had come to the assessee on account of amalgamation of two companies with it, namely, M/s. Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accepted the appeal, vide its order dated October 31, 1985, reversing the order of assessment. 4. The Revenue preferred an appeal before the Income-tax Appellate Tribunal, Jaipur, which relying on its earlier order for the assessment year 1972-73 on the same assessee, vide order dated September 11, 1986 held that once it has been conceded that the assets have to be taken at the book value as existing in the hands of the amalgamated companies for working out the cost of the shares, then the only possible conclusion is that the method adopted for determination of the value of the shares was not proper. 5. We have heard Shri J. K. Singhi, learned counsel for the Revenue and Shri A. Kasliwal, learned counsel for the assessee and perused the impugned orders. 6. Shri J. K. Singhi, learned counsel appearing for the Revenue has argued that the Commissioner of Income-tax (Appeals) has erroneously relied on the judgment of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299, which is based on different factual aspect as in that case it was the difference between the purchase consideration and the value of assets purchased, which was taxed, whereas in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in allowing the loss to the assessee. It was argued that the price of the assets cannot be modified and in no case a modified cost can be adopted in the present case. Notwithstanding the value thereof indicated in the account books of the amalgamated company, price of the shares would be determinable by forces of market and, there-fore, entry of specified price in the account books does not necessarily represent its correct value. The learned counsel in support of his argument relied on the judgment of the Supreme Court in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299 ; [1965] 3 SCR 64 ; AIR 1966 SC 50 and further relied on the Division Bench judgment of the Bombay High Court in Premier Automobiles Ltd. v. ITO [2003] 264 ITR 193 and the judgment of the Calcutta High Court in East India Electric Supply and Traction Co. Ltd. v. CIT [2003] 263 ITR 243. 9. In order to examine the correctness of the impugned orders, we have to go back to the ratio of the judgment of the Supreme Court in Mugneeram Bangur and Co.'s case [1965] 57 ITR 299 to find out in the first place whether the same is applicable to the facts of the present case and, secondly, to ascertain whether the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The judgment of the Bombay High Court in Premier Automobiles Ltd.'s case [2003] 264 ITR 193 on which reliance has been placed by the learned counsel for the assessee was incidentally also a case where, appellant Premier Automobiles Ltd. agreed to sell its plant and machinery for manufacture of Padmini Peugot (AP) to Kalyan Motors Co. Ltd. as a going concern on "as is where is" basis. East India Electric Supply and Traction Co. Ltd.'s case [2003] 263 ITR 243 (Cal) was also a case in which the asses-see-undertaking was acquired by the West Bengal State Electricity Board and when the assessee approached the Income-tax Appellate Tribunal contending that the undertaking having been sold at a slump price and no amount being attributable to depreciable and non-depreciable assets, the decision of the Income-tax Officer was a mistake apparent from the record, which was required to be corrected. It would be evident from both the aforesaid cases that the transaction of sale was between the amalgamated company and the acquiring company whereas in the present case, the sale of shares in the present case has taken place at a secondary stage much subsequent to amalgamation of the two companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the liability to tax if any arising under the Act could not be avoided merely because in consequence of the transfer the interest of the partners in the machinery was substituted by an interest in the shares of the company which owned the machinery." 13. In the case of Artex Manufacturing Co. [1997] 227 ITR 260, the Supreme Court has held that where there is a slump transaction and the business is sold as a going concern, what is to be seen is whether any portion of the slump price is attributable to the stock-in-trade and if on the basis of the facts it can be found that a particular price is attributable to a particular item, then the excess amount would be chargeable to tax under section 10(2)(vii), proviso (ii) of the 1922 Act (section 41(2) of the 1961 Act). In those facts, the Supreme Court found that it was very difficult to attribute part of the slump price to the cost of the land sold in the realisation sale since there was no evidence that any attempt was made to evaluate the land on the date of the sale. The Supreme Court, therefore, did not accept the plea of the assessee similar to the one raised before us and held that it was an admitted case of the assessee e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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