JUDGMENT - M. C. CHAGLA C. J.:

Messrs. Rogers and Co, carried on the busi-of making aerated waters as a firm till the 6th of August 1949 and the partners of the firm were 11 in number. On the 6th of August 1949 this firm converted itself into a private limited company. The shareholders of this company were the same as the partners of the firm and the shares allotted to the shareholders were in the same proportion as the shares held by them in the partnership; the slight difference was due to the shares being round ed off to a specific number. The written-down value of the block assets of Messrs. Rogers and Co. in their books was Rs. 3,81,848/-. These assets were transferred to the limited company at the original cost price of Rs. 4,85,354/- and the Department contended that the limited company in the assessment year 1950-51 was liable to pay tax on the difference between Rs. 4,85,354/- and Rs 3,81,848/- by reason of the second proviso to 5. 10(2)(vii) of the Income-tax Act.

(2) Turning to S. 10(2)(vii), it deals with depreciation and the second proviso is in the following terms:

"Provided further that where the amount for which any such building, machinery or plant is sold, whether du

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