COMMISSIONER OF INCOME TAX Vs. PURI D D

JUDGEMENT

(1.) AT the instance of the Commissioner of the Income-Tax, the following question has been referred by the Appellate Tribunal under section 66 (1) of the Income-tax Act :

(2.) THE facts are that the assessee, D. D. Puri, held 395 shares in the Rupar Electric Supply Co. Ltd. THE licence of this company expired on the 10th of November, 1952, and from that date the electrical undertaking was taken over the Punjab Government, the price fixed being Rs. 7,30,340. THE company went into liquidation on the 28th of February, 1953. For the assessment year 1953-54, which covered the last year when the company was in business, the Income-tax Officer assessed the companys income at Rs. 2,67,357 after taking into account the profit of Rs. 2,61,256 under section 10 (2) (vii) of the Act on the sale price of the undertaking, and the net income was computed at Rs. 1,78,183 after allowing a brought-forward loss.

(3.) THE difference between the written down value of an asset and the price realised by the sale thereof is not really income, but is made taxable income, for the purpose of computation of the assessable income, by the fiction in the second proviso to section 10 (2) (vii) of the Income-tax Act, read with section 2 (6c). On that account, it does not become commercial profit and is not liable to be taken into account in assessing whether in view of the smallness of the profits a larger dividend would be unreasonable."