9911796707
TMI Blog1965 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1922, and has formulated and referred for answer by the High Court the following question of law : Whether on the facts and circumstances of the case and upon a construction of the agreement of 2nd August, 1956, the Tribunal was justified in holding that the sum of Rs. 33,000 forms part of the assessable profits of the assessee-company ? " The assessee, Indian Machinery Stores (Private) Ltd., is a private limited company having its registered office in Patna and was incorporated with the object of taking over the business carried on by a partnership firm called "Indian Machinery and Mills Stores". By an agreement in writing executed on the 2nd August, 1956, by the assessee-company and the said firm, the former agreed to pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 33,000, the said sum was added back to the profits of the assessee-company as being an inflation in the value of the opening stock. The Appellate Assistant Commissioner and the Appellate Tribunal maintained the addition in the appeals filed by the assessee-company. The first clause of the agreement provides : " That the vendors shall sell and the company shall purchase as and on the 1st day of August one thousand nine hundred and fifty-six, FIRSTLY, the goodwill of the said business, trade marks, agencies, concessions, licences, commissions, leases, privileges and titles thereof ; SECONDLY, all structures, outhouses, workshops, sheds and other properties specified in the schedule hereto; THIRDLY, all the plants and machineries, fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of the company were shown in the said schedule to the tune of Rs. 81,811.04 nP. Thus, the total purchase consideration was shown at Rs. 2,60,000. On reading the agreement as a whole, it is obvious that the total consideration of Rs. 2,60,000 was paid not only on account of the value of the assets mentioned in the schedule minus the liabilities mentioned therein, but also on account of the various other properties mentioned in paragraph No. 1 of the agreement quoted above including the goodwill, etc., for which no separate value was shown in the schedule appended to the agreement. It is no doubt true that the sum of Rs. 2,60,000 was paid by the purchasing company to the vendor-firm. The fact that the said amount was paid by issuing sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of fact was executed on the 2nd August, 1956. In that view of the matter, the mention of the book value standing in the accounts of the vendor as on the 1st August, 1956, in the fourth clause of the agreement must mean the book value mentioned on the beginning of that date, that is to say, on the close of the business on the 31st of July, 1956. Moreover, it was not the assessee's case at any stage that there were any figures entered in the books of the vendor-firm on the 1st of August, 1956, different from those entered on the 31st July, 1956. The next sub-mission made on behalf of the assessee was that when in the schedules the value of the stock was shown as Rs. 2,10,285.87 nP., it ,ought to have been taken that the said amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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