Judgement

T. L. VENKATARAMA AIYAR, J. : This is an appeal against the judgment of the High Court of Patna in a reference under S. 66 (1), Indian Income-tax Act, 1922. The respondent is a firm and was the owner of a colliery, at a place called Bhurangya. On 16-3-1946, it entered into an agreement to sell the colliery, lands, super-structures, machinery and fixtures to a company called Bhurangya Coal Co. Ltd., for a consideration of Rs. 6,10,000. There is a schedule attached to the deed of agreement and thereunder are set out in great detail all the properties which are the subject-matter of the agreement. It consists of two parts; the first part includes land, building and the structures and the second part consists of movables including machinery, trucks, pipes, motor cars and the like. The value of the property mentioned in Part 1 is fixed at Rs. 2,00,600 and that of the properties described in the second part at Rs. 4,09,400. It is recited in the agreement that the properties mentioned in the second part are capable of being transferred by delivery it may be mentioned that the Bhurangya Coal Company Ltd., was incorporated only on 18-3-1946. But two of the promoters of the company signed the agreement dated 16-3-1946. as representing the company. After the company was incorporated the directors adopted the transaction by a resolution dated 19-3-1946. On 30-3-l946. all the properties included in the agreement, movables and immovables, were put into the possession of the company. On 7-5-1946, a sale deed was executed and registered in respect of the immovable proparties mentioned in Part 1. The sale deed recites the agreement dated 16-3-1946, and refers to the two classes of properties agreed to be sold thereunder. The actual conveyance under the deed is only of the properties mentioned in Part 1. The prize is also given as Rs. 2,00,600 which is the price mentioned in the agreement for the immovable properties set out in Part 1. These are the facts material for the purposes of the present appeal.

2. On 1-4-1948, S. 12B, Indian Income-tax Act, came into force. It is as follows :-

"The Tax shall be payable by the assessee under the head Capital gains in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March, 1946, and before the 1st day of April, 1948."

3. Now the point that arises for determination in these proceedings is as to the extent to which the profits of the transaction entered into on 16-3-1946 and completed by the sale dated 17-5-1946 are assessable to Income-tax under the above section. So far as the immovables are concerned, the position is clear. The title to them passed to the transferee only when the sale deed was executed on 17-5-1946 and not when the agreement was concluded on 16-3-1946. The transaction therefore falls directly within the operation of S. 12 (b). So far as the movable properties are concerned, the position is equally clear. Title to the movables passed when they were delivered to the transferee and that was on 30-3-1946 and their sale falls outside the section. Therefore, on the terms of the agreement dated 16-3-1946, and the sale deed dated 17-5-1946, the position is that while the respondent will be liable for tax in respect of profits made with reference to immovables covered by the sale deed dated 17-5-1946, it will not be liable to tax in respect of profits attributable to the sale of movables of which delivery was given to them on 30-3-1946. That precisely was the determination made by the Appellate Tribunal.

4. The matter then came before the High Court of Patna on a reference under S. 66 (1), Income-tax Act, at the instance of the appellant. There the contention was raised that the differentiation between movables and immovables on which the judgment of the Tribunal rested had not been made at any time in the prior stages of the proceedings and that was a matter on which further evidence would have to be taken to as