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TMI Blog1976 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 12B of the Indian Income-tax Act, 1922, and that the said surplus should be exempted under the fourth proviso to that section. There was also an excess on realisation over the written down value of the plant, machinery and the buildings transferred by the assessee to the said subsidiary company in the same accounting year. The excess, brought to tax by the Income-tax Officer, has been reduced to Rs. 10,171 by the Appellate Assistant Commissioner. The Appellate Tribunal has, however, allowed the second appeal filed by the assessee. It has been held by the Tribunal that no taxable profit has accrued to the assessee by selling its mining rights including the rights under the said sub-lease to the said 1 00% subsidiary company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said decision of the Gujarat High Court has been reversed by the Supreme Court, whose judgment is reported in [1969] 72 ITR 603 (SC), this question must also be answered in favour of the revenue. Mr. J. C. Pal, the learned counsel for the assessee, has contended before us that it was not the case of the department that these sales were really a device to conceal the real nature of these transactions and, therefore, these sales should not be treated as sales to an outsider. It is his submission that with a view to minimise the tax liabilities and to readjust its business activities, the assessee has sold this mine and its mining rights under the sub-lease to this subsidiary company in order to carry on the same activity though not direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in B. M. Kharwar's case [1969] 72 ITR 603, 608 (SC) said thus: "Assuming that thereby readjustment of the business relationship was intended the liability to be taxed in respect of the readjustment had to be determined according to the strict legal form of the transaction. The company was a legal entity distinct from the partnership under the general law. Transfer of the machinery was by the firm to the company; and the legal effect of the transaction was to convey for consideration the rights of the firm in the machinery to the company. The transaction resulted in excess realisation over the written down value of the machinery to the firm, and the liability to tax, if any, arising under the Act could not be avoided merely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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