Motiram Rosan Lal Coal Co. Ltd. vs Commissioner of Income Tax

The question which has been formulated for our decision is:

whether the "original cost" appearing in Sub-clause (6), Clause (2) to Section 10 of the Act means the original cost paid by the assessee or that paid by the predecessor in business of the assessee.

Our attention has been called to the decision of the Madras High Court in the case of The Commissioner of Income Tax Vs. Massey and Co. Ltd., and to the decision of the Bombay High Court in the case of In Re: The Saraspur Mills Co. Ltd., . In our opinion the decision in the latter case is right and we are unable to agree with the decision of the Madras High Court. The words in Section 10(2)(6) "original cost thereof to the assessee" must be strictly construed and refer of course to the genuine original cost to the assessee and not necessarily to anything which the assessee may have stated to be the original cost.

No question of fact however arises in the particular case before us and we merely make this latter observation with a view of preventing possible frauds on the department by reason of a fictitious price being placed in the purchase of a business upon the partition of the purchase price to be allocated to business machinery or plans. The answer to the question propounded should be in the affirmative. The assessee is entitled to his costs which we fix at two hundred rupees.