Commissioner of Income Tax vs Vijay Transport Co.

G.G. Sohani, Actg. C.J.

As directed by this court, the Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the true nature of the transaction dated March 24, 1955, was that of an exchange and not of sale and consequently in deleting the addition of Rs. 68,821, which was added as profit under the second proviso to Section 10(2)(vii) of the Indian Income Tax Act, 1922 ?"

The material facts giving rise to this reference briefly are as follows : During the previous year relevant to the assessment year 1966-67, the assessee-firm entered into an agreement with the Combined Transport Services Pvt. Ltd., whereby the buses run by the assessee-firm were taken over by the company for an agreed consideration. This transaction was treated as sale by the Income Tax Officer and the difference between the written down value and the agreed consideration was assessed u/s 10(2)(vii) of the Indian Income Tax Act, 1922, hereinafter referred to as "the Act". Aggrieved by that order, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the finding of the Income Tax Officer modifying the amount of profit. On further appeal before the Tribunal, the Tribunal held that the transaction by which the buses were transferred to the Combined Transport Co. Pvt. Ltd. was in the nature of sale and not exchange and, therefore, the provisions of Section 10(2)(vii) of the Act were attracted. Aggrieved by the order passed by the Tribunal, the assessee sought reference and a reference was accordingly made to this court. When that reference came up for hearing before this court, the matter was remitted to the Tribunal for reconsideration. The Tribunal, thereafter, heard the appeal afresh and held that the transaction in question amounted to an exchange and not a sale. In this view of the matter, the Tribunal allowed the appeal of the assessee. Aggrieved by the order passed by the Tribunal, the Revenue sought reference but as the application made by the Revenue in that behalf was dismissed, the Revenue preferred an application before this court u/s 256(2) of the Income Tax Act, 1961. That application was allowed and the Tribunal was directed to refer the aforesaid question of law to this court for its opinion. That is how the aforesaid question of law has come up before us for consideration.

At the time of hearing, learned counsel for the parties stated that the matter arising in this case also came up for consideration before this court in Commissioner of Income Tax Vs. Amar Transport Services, . A Division Bench of this court, while considering the nature of a transaction similar to that entered into by the assessee, held that the transaction was one of sale. Learned counsel for the assessee was unable to point out any reason for taking a view different from that in [1986] 102 ITR 1. Following that decision, therefore, it must be held that the Tribunal was not right in holding that true nature of the transaction was that of exchange only and not of sale. The Tribunal was, therefore, not justified in deleting the addition of Rs. 68,821 which was added as profit under the second proviso to Section 10(2)(vii) of the Act.

For all these reasons, our answer to the question referred to us is in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.