KAMLAPAT MOTILAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 66 (2), Income-tax Act (XI [11] of 1922) has had a chequered history, It came up before several Benches from time to time but was not decided while the connected case No. 528 of 1936 which was a reference against the order made in the assessment year 1933-34 was decided in the year 1939.

(2.) The assessment year in question was 1934-35 and the previous year was the calendar year 1933.

(3.) The Union Indian Sugar Mills Co., Ltd., Kanpur (hereinafter referred to as the Mills) was wound up on a creditor's petition by a winding up order dated 28th May 1926. On 22nd November 1926, an application was filed by a partner ship, known as Kamlapat Moti Lal (hereinafter referred to as the firm) offering to take a mortgage of the Mill or in the alternative to purchase the same. The terms of such mortgage or of sale were given in the application filed on that date, On 25th February 1927, this Court approved the scheme of making a mortgage of the Mills to the firm on certain amended terms. The firm was put in possession of the property belonging to the Mills. Disputes, however, arose between the liquidators and the firm as to the terms to be agreed upon for the execution of the mortgage and the mortgage deed was never executed. The matter was ultimately taken to the Privy Council and was decided by their Lordships on 6th July 1929 Kamlapat Moti Lal v. Union Indian Sugar Mills Co., Ltd., 1929 A. L. J. 1289: (A. I. R. (16) 1929 P. C. 256). Their Lordships held that the share-holders should have been consulted and gave certain directions for the meeting of the share-holders. The share-holders approved of the scheme, but the firm was then not prepared to take the property on mortgage, The liquidators thereupon filed a suit for specific performance of contract. The suit was, however, dismissed by the Subordinate Judge, Kanpur, on 6th January 1931, and as no appeal was filed against that decision, the decision became final.