JAYANTILAL BHOGILAL DESAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference at the instance of the assessee raises for our consideration the following three questions of law which have been referred to us for opinion by the I. T. A. Tribunal, Ahmedabad Bench 'C' :

(2.) THE short facts leading to third reference may be stated at this stage. The assessment year under reference is 1967 -68, the previous year being Samvat year 2022, which ended on November 12, 1966. The assessee carried on business of manufacturing and selling pencils in Ahmedabad City. He sold machineries, goodwill, stock, furniture, etc., of his business to a firm of M/s. Acme Pencil Factory for Rs. 4,61,111 on June, 30, 1966. On July 1, 1966, a deed called 'sale deed in respect of sale of movable properties' was executed by the assessee in favour of the partners of M/s. Acme Pencil Factory. In this deed, it was stated that the assessee had sold the machineries, tools, etc., of his business to the partners of the said firm for Rs. 3,25,000 on June 30, 1966. It was further stated in the said deed that the price of stock, stores, ready goods, was settled by mutual agreement on June 30, 1966. The possession of the goods sold was also handed over to the purchasers on June 30, 1966. A further deed dated December 14, 1966, was also executed by the assessee in favour of the purchasers, viz., M/s. Acme Pencil Factory. In this deed, it was clarified that the a consideration of Rs. 3,25,000 was paid for the machineries, tools, etc., of the assessee's business. It was further stated that the price of the goodwill transferred to the said firm was agreed at Rs. 25,000 and that the stock was sold to the said firm for Rs. 1,11,111; it was stated that the total price of the machineries, tools, goodwill, tenancy rights and stock, was determined at Rs. 4,61,111.The rest of the terms of the said deed are not much relevant.

(3.) THUS , the total income of the assessee was computed at Rs. 2,70,000 by the ITO, Circle IV, Ward -B Ahmedabad.