Judgment

GROVER, J.:- The sole question for determination in this appeal by special leave is whether on a true interpretation and construction of the second proviso to Section 10 (2) (vii) of the Income-tax Act, 1922, sale of the assets of an assessee effected for the purpose of closing down the business would be covered by that proviso and would be assessable as profit.

2. The assessee was running the business of plying buses in the name of Kumar Motor Service. During the assessee s previous year which was the year ending August 16, 1959 the buses had been plied for part of the year but they were sold between August 16, 1958 and January 13, 1959. Two of the buses had been sold for Rs. 78,000 and the other four for Rs. 35,000, the total consideration received being Rs. 1,13,000. The assessee claimed a payment of Rs. 2,000 as brokerage. The Income-tax Officer fixed a sum of Rs. 25,000 as the route value and held this amount to be a capital gain assessable to tax. On the balance of Rs. 86,000 he worked out the profits in the following manner:-

Sale price of 6 buses Rs. 86,000

Written down value of six buses Rs. 36,712

Rs. 49,288

The income-tax Officer consequently assessed the sum of Rs. 49,288 as profit under the second proviso to Section 10 (2) (vii). Before the Appellate Assistant Commissioner in appeal the assessee contended that the business had been transferred as a whole and therefore no profit could be taxed under the aforesaid provision. This contention was rejected by the Appellate Assistant Commissioner on the ground that the transaction was only of sale of buses along with the route value and this constituted sale of major assets but the business as such was not transferred or handed over to any party. Before the Income-tax Appellate Tribunal the determination of Rs. 86,000 as the value of six buses was not disputed and the only point agitated related to the accessibility of the amount of Rs. 49,288 as business profit under the second proviso. The tribunal was of the opinion that the buses had been plied by the assessee for part of the previous year and the profit on the sale of these buses was taxable under the said provision. The tribunal in its appellate order noticed the decision of this Court in Commr. of Income-tax, Madras v. Express Newspapers Ltd., Madras, (1964) 8 SCR 189 at p. 195 in which the question arose whether the second proviso would apply where the sale had been made in the process of winding up of a company but distinguished it on the ground that this Court in that case considered the second proviso as it stood before the amendment made by Section 11 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (67 of 1949). The decision of this Court in Commr, of Income-tax, Kerala v. West Coast Chemicals and Industries Ltd., (1962) 46 ITR 135 (SC) was also held by the tribunal to he inapplicable to the facts of the present case.

3. The assessee moved the tribunal for making a reference to the High Court and the following question was referred :

"Whether on the facts and in the circumstances of the case, the sum of Rupees 49,288 was assessable as profit under the provisions of Section 10(2) (vii)?"

4. Although the tribunal had given no finding that the whole of the bus service business had been wound up during the relevant period, the High Court proceeded to answer the question on that assumption. It is difficult to see how the High Court was justified in saying that the tribunal had apparently accepted the contention that the sale was a closing down or a realisation sale. In such a situation we might have followed the course which commanded itself in Commr. of Income-tax, Kerala v. R. R. Ramakrishna Pillai, (1967) 66 ITR 725 (SC) but we are of the opinion that even on the assumption that the sale of the buses was a closing down or a realization sale it would nonetheless be taxable since the sale was made after the amendment of the second proviso by Act 67 of 1949. The High Court in the pr