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TMI Blog1962 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 1946, all the freehold land lying at 31, Chowringhee Road, and 1, Russell Street, Calcutta, together with all buildings, fixtures, furniture and other moveable property and the monthly tenancy of the premises at Commercial Road, Darjeeling, and all cash, bank and other balances, stock-in-trade, books debts, etc., belonging to the vendors including the benefit of any excess profits tax refund and the advantages of all contracts with assistants and other and generally the whole of the undertaking and assets of the vendors including its goodwill and the right to use the name Hall and Anderson . The price was fixed at ₹ 80,00,000 apportioned in the manner following, namely, ₹ 20,00,000 for the freehold land, ₹ 30,00,000 for the buildings and other immoveable properties and ₹ 30,00,000 for the moveable properties. Possession was to be given to the new company on the execution of the agreement for sale or at any rate within two weeks thereof. The vendors undertook to execute a conveyance and any other documents which might thereafter be considered necessary in respect of the portions of the premises agreed to be sold but which did not pass by delivery of poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place... Provided further that the tax shall not be payable by an assessee in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset, being property the income of which is chargeable under section 9 and which has been possessed by the assessee or a parent of his for not less than seven years before the date on which the sale, exchange or transfer took place; and the amount of such profits or gains shall not be included in his total income... (2) The amount of a capital gain shall be computed after making the following deductions from the full value of the consideration for which the sale, exchange or transfer of the capital asset is made, namely:... Provided further that where the capital asset became the property of the assessee...before the 1st day of January, 1939, he may, on proof of the fair market value thereof on the said date to the satisfaction of the Income-tax Officer, substitute for the actual cost such fair market value which shall be deemed to be the actual cost to him of the asset, and which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the vendor. It is true that a transferor or any person claiming under him may be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken possession and has done some act in furtherance of the contract and is willing to perform his part of it. In this case the public company had paid the full price agreed upon and had gone into possession of the property on December 1, 1946. It was not, therefore, open to the assessee to enforce any right in respect of the property against the public company. It may therefore be said that, in substance, though not in law, the public company had become the owner of the property on December 1, 1946. On behalf of the revenue it was contended that the substance of the transaction has got to be considered for income-tax purposes and that the only thing remaining outstanding on December 1, 1946, being the execution and registration of a formal document to record the transfer, the sale should be treated as having been effected on the said date for income-tax purposes. In support of this, our attention was drawn to the recital in the agreement for sale that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sell the colliery with its plant, machinery and fixtures, etc., to a company called Bhurangya coal Company Ltd. for ₹ 6,10,000 on March 16, 1946. The schedule attached to the deed of agreement set out in detail the properties covered by it. It consisted of two parts, the first part include the lands, building and structures; the second part consisted if moveable with machinery, trucks, pipes, motor cars, etc. The value of the properties set out in the first part was fixed at ₹ 2,00,600 and that of all properties described in the second part at ₹ 4,09,400. The company itself was incorporated on March 18, 1946, the agreement having been signed on its behalf by the promoters. After its incorporation the directors of the company adopted the transaction by a resolution passed on March 29, 1946, and the company was put in possession of the properties moveable and immoveable on March 30, 1946. A deed of sale was executed by the firm and registered in favour of the company on May 17, 1946. The question in that case was what were the properties sold to the company on May 17, 1946; in other words, were they only the properties mentioned in the first part of the schedule o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the income-tax authorities that 1/6th of the property was tenanted, the rest being used by the assessee in its business. Under section 9 of the Indian Income-tax Act an assessee has to pay tax under the head 'income from property' in respect of the bona fide annual value of the property consisting of any building or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him, the profits of which are assessable to tax, subject to allowances mentioned. Five-sixths of the property which was used by the assessee for its business was not property, the income whereof was chargeable under section 9. Clearly therefore 1/6th portion of the property would be exempt from charge under section 12B. The same view was taken by the Madras High Court in Sri Kannan Rice Mills Ltd. v. Commissioner of Income-tax [1954] 26 I.T.R. 351. Question No. 3: In this case the income-tax authorities did not accept the valuation of the capital asset of the property made by the assessee but estimated the fair market value thereof as on January 1, 1939, at ₹ 25,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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