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TMI Blog1964 (7) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... who were the karthas of their respective Hindu undivided families. The capital of the limited company of Rs. Nine Lakhs was divided into 900 shares of ₹ 1000 each, and each branch was allotted half the number of shares. In the books of the company, the assets and liabilities were valued at a particular figure. One of the items so transferred was the stock of newsprint the cost price of which was ₹ 73,693. But the valuation adopted at the time of the transfer of he business to the limited company was ₹ 1,74,364. For the assessment year 1940-41, the assessee claimed the benefit of the succession relief and asked that the profit of a period of 20 months, that is, the period between the end of the previous year and the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the surplus on transfer of newspaper print, which is the raw material for the business, which the assessee carried on, is taxable?" We are not setting down the other three questions, for, it is conceded both by the assessee and the department that if this question should be answered in favour of the assessee, the other questions will not arise and they would be withdrawn form the reference. (4) The short question thus is whether on the transfer of a business as a going concern, the valuation of the stock of newsprint for the purpose of the transfer would, if it should happen to exceed the cost price of the newsprint in the books of the firm, result in taxable profits to the transferor. Mr. S. Padhmanabhan, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale of chemicals could in proper circumstances form a part of its business. It was found as a fact that that power had been rarely exercised and was therefor not of mush significance. Their Lordships held that the transaction inclusive of the sale winding up sale in order to close down the business would depend upon the peculiar facts of each case and there can be no set rule for the decision of that point. Their Lordships refer to the dividing line between the two classes of cases, one where the sale formed part of trading activities and the other where the realisation was not an act of trading, typified by the well-known cases of the Californian Copper Syndicate v. Harris, (1905) 5 Tax Cas 159 on the one hand, and Tebrau (Johore) Rubb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee wished to retire from business and were not investing in the purchase of more stock, they were still carrying on business of trading till the existing stocks were exhausted. That, view was upheld by the House of Lords. Finally, their Lordships observed thus: There is no doubt to this case that the assessee company was wound up at least in so far as its match manufacture was concerned. That the business of the company was being sold as a going concern and was in fact worked by the assessee company on behalf of the buyer till the entire consideration was paid makes no difference, because the agreement clearly indicated that he assessee company was keeping the factory going not in its own behalf but entirely on behalf of the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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