A S BHARGAVA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The following questions of law have, under directions of the High Court dated 26th July, 1966, been referred to this Court for opinion under section 256(2) of the Income-tax Act, 1961, namely:-

(2.) The agreement between the assessee and the newly floated' company is Annexure''C' dated 26th June, 1953 which, has been relied upon by the Income-tax authorities as well as the Tribunal. The agreement recites that A. S. Bhargava has brought about the incorporation of the company with a view to sell and transfer all. properties, rights and benefits accrued or to accrue from the allotment to him of the petrol pump and service station at Delhi Gate, Delhi and the Directors had agreed to take over the said properties, rights and benefits and that the vendors do hereby sell and transfer all properties, rights and benefits as defined above to the aforesaid company for a consideration of Rs. 30,000.00 to be paid by the company by the allotment of 300 ordinary (non-transferable) shares of Rs. 100.00 each as fully paid up and the total face value of these fully paid up shares was Rs. 30,000.00 shall be deemed to be full consideration for relinquishing all rights and privileges attached to the petrol pumping station by the vendors in favour of the company.

(3.) The facts established disclose that the assessee had obtained a dealership of the petrol pump to himself from the Caltex Company. The same was an allotment of a petrol pump and service station or in other words a licence to run the same and constituted the capital of the assessee and it was not a trading asset. By the aforesaid agreement, the assessee transferred the said capital to the newly floated company for a consideration of shares worth Rs. 30,000.00. The consideration for transfer of the capital, therefore, constituted capital and was not a revenue receipt as it has not been shown that the assessee had commenced the business or had acquired any trading assets or he had, after the allotment, been left with any vestige of business under the allotment, nor has it has been shown that it was the business of the assessee to obtain and transfer allotments of petrol pumps.