JUDGMENT

S.C. Agrawal, J.-This appeal by certificate granted by the Gujarat High Court under Section 261 of the Income Tax Act, 1961 (hereinafter referred to as the 1961 Act ) involves the question whether the surplus as a result of difference between the written down value and the sale consideration for the Plant, machinery and dead stock transferred by the assessee is taxable under Section 41(2) of the 1961 Act. The appeal relates to the assessment year 1967-68.

2. The assessee is a partnership firm which was carrying on the business of manufacturing artsilk cloth. A private limited company by the name of Artex Manufacturing Company Private Ltd. (hereinafter referred to as the company ) was formed with a view to take over the business of the assessee as a running concern. On March 31, 1966, the assessee and the company entered into an agreement whereunder the assessee agreed to sell to the company the business hitherto carried on by the assessee as a whole going concern. The consideration for the said sale was Rs. 11,50,400/- which was paid and satisfied by allotment of 11,504 fully paid up equity shares of Rs. 100/- each according to original shares of partners of the assessee.