D M ALEXANDER Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THE two questions that were referred to this Court were --

(2.) THE accounting year was 1st April, 1942, to 31st March, 1943, and the year of assessment was 1943-44 It is better to deal with each question separately, as the sets of facts necessary for answering each question are different

(3.) FROM the extracts of correspondence supplied by the assessee during the enquiry before the Income-tax authorities and appended to the printed record made available to us, it would appear that on 13th November, 1942,--it should be remembered that the assessee took possession of the estates on 11th November, 1942,--the assessee supplied his agent Velu Menon of Cottangady with sets of account books. There were also other letters to show that the assessee himself was managing the estates up to 5th February, 1943. FROM a letter written on 8th February, 1943, by the assessee to Davidson & Co., it would appear that the assessee placed an order with them for the supply of a Sirocco Drier and a 44" S. A. Roller. These were two items of machinery included in the improvements suggested by Mr. Leigh in his report dated 9th October, 1942. The order itself was not put in evidence, and there was nothing to indicate on which date the order was placed with Davidson & Co. Davidson & Company would appear to have supplied the 44" S. A. Roller, because in the letter dated 8th February, 1943, the assessee asked for the erection of this plant. In the same letter the assessee cancelled his order for the Sirocco Drier. It was represented during the arguments before us that the 44" S. A. Roller cost about Rs. 9,500. As the assessee himself explained in his letter dated 8th February, 1943, he cancelled the order for the Sirocco Drier as he had already taken steps to sell the Cottangady group of estates. On 3rd February, 1943, the assessee entered into an oral agreement with Mr. P. S. George to sell the Cottangady group of estates to him for Rs. 5,50,000 and the assessee received an advance of Rs. 27,500. On 13th February, 1943, the assessee executed the written agreement of sale. It was during the interval, on 8th February, 1943, that the assessee informed Davidson & Company that the order for the supply of the Sirocco Drier should stand cancelledIt should be remembered that, though the assessee took possession of the Cottangady estates on 11th November, 1942, no document of sale was executed by the vendors. It was subsequent to the agreement of sale between the assessee and Mr. P. S. George that the sale deeds were executed by Mr. Hall, and Mrs. Emily Hall. One sale deed was executed on 11th February, 1943, covering the three estates that were situated in Cochin State. The second sale deed for the fourth estate, which was in British India, was executed on 26th February, 1943. Though Mr. P. S. George negotiated the purchase of this group of estates, it was obviously his intention that the eventual purchaser should be the Chandramalai Estate Ltd. which company Mr. P. S. George promoted. The agreement of sale dated 13th February, 1943, provided for the sale to Mr. George or his nominee. Clause 7 of that agreement required the assessee to make out a good and clear title to the properties sold, and that was apparently why the assessee had to obtain the sale deeds from the previous owners, Mr. Hall and Mrs. Emily Hall. Rs. 27,500 of the agreed purchase price, it should be remembered, was paid to the assessee on 3rd February, 1943, itself. The agreement of 13th February, 1943, provided for the payment of the balance before 31st March, 1943 the balance was actually paid on 10th March, 1943. On 19th April, 1943, the assessee executed the sale deeds in favour of Chandramalai Estate Ltd