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TMI Blog1968 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was incorporated in the year 1924. It was supplying electricity to the city of Hubli under a licence granted under the Indian Electricity Act, 1910. By a notice issued by the Government of Bombay on January 28, 1944, that licence was revoked with effect from May 1, 1944, and under an order made by that Government on April 29,1944, under clauses (d) and (g) of section 5 of the Indian Electricity Act, as it then stood before its amendment by Central Act 32 of 1959, the assessee was intimated that the Government of Bombay had elected to purchase the undertaking and called upon the assessee to sell it to the Government at a price to be determined under clause (b) of section 5 of the Act and to hand over possession on May 1, 1944. When th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. But, the Income-tax Officer was of the opinion that there was a sale only on July 15, 1960, when the compensation payable by the Government of Bombay was determined, and not on May 3, 1944, when possession was delivered or taken over. But, in the appeal preferred by the assessee, the Appellate Assistant Commissioner dissented from that view taken by the Income-tax Officer and so, that part of the assessment which related to capital gains was set aside. The further appeal preferred by the Income-tax Officer to the Appellate Tribunal was dismissed. The question of law referred to this court under section 66(2) of the Act reads: " Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,32,520 is not liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is constituted, the State Government shall have the option of purchasing the undertaking and, if the State Government elects to purchase, the licensee shall sell the undertaking to the State Government upon the terms and the conditions similar to those set forth in clause (b). " The option referred to in this clause was exercised by the Bombay Government on April 29, 1944, when the assessee was directed to sell the undertaking to it at a price which had to be determined as provided by clause (b). It would be recalled that possession was delivered by the assessee to the Bombay Government on May 3, 1944, and, according to the statement of the case submitted to us, the Government of Bombay, after taking over possession, dismantled the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of section 5 of the Indian Electricity Act which is equally applicable to a purchase by the Government under clause (d) and that proviso reads? " Provided that the value of such lands, buildings, works, materials and plant shall be deemed to be their fair market value at the time of purchase :... " So, it becomes clear that the sum of Rs. 9,85,510 which was determined by the arbitrator as the market value of the undertaking was the market value on the date of the purchase and that date was May 3, 1944. So, our answer to the question referred to us should be in favour of the assessee and our answer is that the sum of Rs. 2,32,520 was not liable to tax under section 12B of the Indian Income-tax Act, 1922, for the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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