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TMI Blog1986 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the provisions of section 12B of the Indian Income-tax Act, 1922, were not attracted ? " The assessee, a public limited company, was put into liquidation under the orders of the Allahabad High Court. An amount of Rs. 8,58,893-5-6 was payable by the assessee to the State of Uttar Pradesh on account of arrears of cane cess. In proceedings for recovery of that amount as arrears of land revenue, the Collector of Deoria attached the assessee's mills and put them to auction sale on November 10, 1955. The land, building, machinery and parking grounds were sold for Rs. 24,00,000 while the movable properties including mill stores, spare parts, tools and equipment were sold for Rs. 1,80,000. All the properties were purchased by the Kanpur Sugar Works (P.) Ltd. Although the sale was held on November 10, 1955, the sale certificate under rule 285M of the U.P. Zamindari Abolition and Land Reforms Rules, 1952, could not be issued till July 4, 1956, on account of objections raised by the assessee, in spite of the fact that the entire amount of purchase money of Rs. 25,80,000 had been paid by the purchasers on December 8, 1955. During the period in which the objections were pending, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in the assessee's contention that the value of the fixed assets of the mills was Rs. 18,50,000 as on January 1, 1954, and that there was no justification for initiating the assessment proceedings under sub-section (1A) of section 34 of the Indian Income-tax Act, 1922. On appeal by the assessee, the Appellate Assistant Commissioner by his order dated May 1, 1968, agreed with the Income-tax Officer that the sale attracted clause (vii) of sub-section (2) of section 10, that it took place on July 4, 1956, and that the assessee was, therefore, liable to capital gains under section 12B. But contrary to the view taken by the Income-tax Officer, the Appellate Assistant Commissioner held that the assessee was entitled to substitute the market value of the machinery as on January 1, 1954, in place of its cost price under clause (iii) of section 12B, and accordingly reduced the capital gains from Rs. 10,23,210 to Rs. 4,89,343. Both the Revenue and the assessee filed appeals before the Income-tax Appellate Tribunal. Before the Appellate Tribunal, it was the case of the assessee that while an auction sale may be a sale within the meaning of section 12B, it was not a sale as contemplated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee: Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place:..." The argument for the assessee is that the word " sold " in the clause refers to a sale transaction effected on the free volition of the seller and not where it is in the nature of a compulsory transfer for recovering an arrear of land revenue. Reliance is placed on Calcutta Electric Supply Corporation Ltd. v. CIT [1951] 19 ITR 406, where the Calcutta High Court laid down that the word " sale " in its ordinary meaning, was a transaction entered into voluntarily between two persons, the buyer and the seller, and that, therefore, the requisition of an electricity generating plant by the Government under sub-rule (1) of rule 83 of the Defence of India Rules, not being a voluntary sale, did not fall within the mischief of clause (vii) of sub-section (2) of section 10. Our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions considered in this case. We are clearly of opinion that the sale of the properties of the assessee fall within the scope of clause (vii) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922, and, therefore, the first contention must be rejected. Turning to the second contention, the question is whether the sale can be said to have taken place when the properties were auctioned or on the date when the sale certificate was issued. The recovery of an arrear of land revenue in Uttar Pradesh is governed by the provisions of the U.P. Zamindari Abolition and Land Reforms Act and the Rules made thereunder. We have been taken through the pertinent provisions of that Act and its Rules. The High Court, in the judgment under appeal, has made detailed reference to them and, in an admirable exposition of the law, has demonstrated that the date on which the sale certificate was issued is the date on which the sale must be regarded as having taken place. We have no hesitation in endorsing that view. Section 279 of the U.P. Zamindari Abolition and Land Reforms Act specifies the modes for the recovery of an arrear of land revenue and section 282 prescribes the procedure for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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