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TMI Blog1971 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Commissioner of Income-tax, Andhra Pradesh, Hyderabad, under section 256(1) of the Indian Income-tax Act, 1922 (hereinafter called "the Act"), the following question has been referred for our opinion : "Whether, on the facts and in the circumstances of the case, the provisions of section 10(2)(vii) were applicable to the transaction in question ? " In order to appreciate the scope of the question it is necessary to refer briefly to the facts that gave rise to the same. Srinivasa Bus Service, Puttur, the respondent-assessee, was a registered firm of three partners carrying on business in bus transport. For the assessment year 1960-61, corresponding to the relevant accounting period ending with March 31, 1960, the assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant Commissioner, it was held that there was no transfer of the two vehicles by the assessee to the two partners on April 1, 1960, when the firm was dissolved and, hence, the provisions of section 10(2)(vii) are not attracted. He, therefore, deleted the addition of Rs. 9,136 from the assessment. Aggrieved by the decision of the Appellate Assistant Commissioner, an appeal before the Income-tax Appellate Tribunal was preferred by the Income-tax Officer contending, inter alia, that the transaction in substance amounted to sale attracting the provisions of section 10(2)(vii) of the Act. Reliance was placed by the department in support of its plea on the decision of the Mysore High Court in Y.V. Srinivasamurthy v. Commissioner of Income-tax. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry or plant has been sold or discarded or demolished or destroyed, is liable to be deducted in computing the business income of an assessee under section 10(1). The second proviso to sub-section (2)(vii) of section 10 which is material for our purpose reads thus : "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." Though clause (vii) of sub-section (2) of section 10 provides for the deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstrued as it is a deeming provision in a taxing statute. The burden is undoubtedly on the revenue to establish the ingredients of this provision in order to bring the case within its purview. As pointed out earlier, in order to attract the aforesaid provisions, there must invariably be a sale of any building, machinery or plant in the previous year. Secondly, the amount received from such a sale must exceed the written down value of such building, machinery or plant. If the sale price exceeds the original cost of the building, machinery or plant, such excess amount could be charged as capital gains. True, as urged by the learned counsel for the revenue, the written down value on the date of the dissolution of the firm and the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued as stated in the Sale of Goods Act. According to section 4 of the Sale of Goods Act, there should be a transfer on sale of goods or property in goods by the seller to the buyer for a price. No doubt, the contract of sale of goods may be one entered into between one part-owner and another. It may also be absolute or conditional. However, the heart of the matter is that there should be a transfer of property by the vendor called the seller and the purchaser, the vendee, for a price. Unless these ingredients of a valid sale are satisfied or established, it cannot be said that the transaction in question would amount to sale attracting the provisions of section 10(2)(vii) of the Act (Income-tax Act). In the present case as per the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in Commissioner of Income-tax v. Dewas Cine Corporation, wherein each theatre was deemed to have been returned to the original owner in satisfaction of his claim to a share in the residue of the assets on the dissolution of the partnership. It was held that there was no sale by the partnership to the partners when the assets of the partnership were divided or allocated in respect of those assets, depreciation was allowed and they were taken at their written down value. We may also add that the decision of the Supreme Court in Commissioner of Income-tax v. Bankeylal Vaidya also supports the view taken by us. For these reasons, our answer to the question is in the negative and against the department. The Commissioner shall pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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