JUDGMENT

PATHAK, J.:— This appeal is directed against the judgment of the Allahabad High Court answering the following questions in the negative :

"1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of S. 10(2)(vii) of the Income-tax Act, 1922 were not attracted?

2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sale had taken place before 1-4-1956 and, therefore, the provisions of section 12B of the Income-tax Act 1922 were not attracted?"

2. The assessee, a public limited company, was put into liquidation under the orders of the Allahabad High Court. An amount of Rs. 8,58,893/5/6 was payable by the assessee to the State of Uttar Pradesh on account of arrears of cane-cess. In proceedings for recovery of that amount as arrears of land revenue, the Collector of Deoria attached the assessees mills and put them to auction sale on November 10, 1955. The land, building, machinery and parking grounds were sold for Rs. 24,00,000/- while the moveable properties including mill stores, spare parts, tools and equipment were sold for Rs. 1,80,000/-. All the properties were purchased by the Kanpur Sugar Works (P) Ltd., Although the sale was held on November 10, 1955, the sale certificate under R. 285-M of the U.P. Zamindari Abolition and Land Reforms Rules, 1952 could not be issued till July 4, 1956 on account of objections raised by the assessee, in spite of the fact that the entire amount of purchase money of Rs. 25,80,000/- had been paid by the purchasers on December 8, 1955. During the, period in which the objections were pending, i.e., November 10, 1955 to July 2, 1956, the Government of India appointed an Authorised Controller to run the sugar mills by a notification dated November 25, 1955.

3. After possession of the mills was given to the purchasers, a suit was filed by them against the assessee claiming damages for loss of profits on account of the possession of the mills not having been delivered to them immediately after the auction sale. In the suit the purchasers claimed, in the alternative, compensation for loss of interest on Rs. 25,80,000/- from the date of deposit of the sale price to the date of delivery of the mills. The claim of the purchasers was ultimately settled by compromise for a sum of Rs. 1,25,000/-.

4. In assessment proceedings for the assessment year 1957-58, the relevant accounting period being the year ended October 31, 1956, the Income-tax Officer called upon the assessee to explain why the excess amount which the assessee had received on sale of the building, machinery and plant over the difference between the original and the written down value should not be subjected to tax under Cl. (vii) of sub-s. (2) of S. 10 and under S. 12-B of the Indian Income-tax Act, 1922. The assessee replied stating that (1) simultaneous computation of income under Cl. (vii) of sub-s. (2) of S. 10 and of capital gains under S. 12-B amounted to double taxation and was against the principles of natural justice and the legislative intention; (2) the sale being a compulsory sale was not a sale within the meaning of Cl. (vii) of subs. (2) of S. 10 (3) moveable property was exempt from capital gains tax; and (4) as the sale was complete before April 1, 1956 it did not attract the provisions. relating to capital gains which became effective from April 1, 1956 only. Alternatively, it was claimed that the value of the mills as on January 1, 1954 was much higher than that determined and the assessee was not liable to tax on capital gains. The Income-tax Officer rejected the contentions raised by the assessee, and completed the assessment under sub-s. (3) of S. 23 read with sub-s. (1A) of S. 34 of the Indian Income-tax Act, 1922 on March 29, 1965, computing the profits under Cl. (vii) of sub-s. (2) of S. 10 at Rs. 10,07,000/- and the capital gains at Rs. 10,23,210/-. The Income-tax Officer did not find any substance