P. B. MUKHARJI, J.

( 1 ) IN this Reference under Section 66 (2) of the Income-tax Act the High Court directed the Tribunal to refer the following question for its decision:"whether on the facts and in the circumstances of the case the Tribunal was right in holding that the sum of Rupees forty thousand two hundred and forty seven could not be deemed to be profits of the assessee company under second proviso to Section 10 (2) (vii) of the Indian Income-tax Act?"

( 2 ) THE assessee is Associated Clothiers Ltd. of 21, Old Court House Street, Calcutta and is a private Limited Company. It was formerly carrying on business as clothiers and dealers under the name of M/s Phelps and Company Limited. M/s Phelps and Co. started as a partnership on the 5th February, 1912 and was later converted into a Limited Company on the 30th September, 1939, On the 21st March, 1952 the name of Phelps and Company Ltd. was changed into the name of the assessee. But on the same day a new Phelps and Co. was incorporated. On this 21st March, 1952, there was an agreement between the Associated Clothiers Ltd. , the assessee, described as having its registered office at 5, Mission Row Extension, Calcutta and called the Vendor and this Phelps and Co. Ltd. described as having its registered office at 21, Old Court House Street, Calcutta as the purchaser. It is found as a fact that Phelps and Co. Ltd. transferred all its assets and liabilities to the assessee, although the agreement of the 21st March 1952 says "a part", and it is also further found as a fact that all the shares of the purchaser company were held by the assessee. It has also been admitted by the assessee that all the shareholders and all the Directors of these two companies were the same at the relevant time and their objects in the Memorandum and Articles of Association were for all practical purposes identical.

( 3 ) THE controversy arises with regard to a building at 9a, Connaught Place, New Delhi. It was an asset of the assessee as on the 21st March 1952, By Clause 9 of the Agreement dated 21st March, 1952, the transfer of the said premises was deemed to take effect from the 1st July, 1952 and the purchaser company was entitled to all rents issues and profits of the said premises and was responsible for payment of all rents, taxes and other outgoings accruing due from that date. No deed of conveyance was executed and registered. But it is common case that the purchaser entered into possession of the said premises on the 1st July, 1952 which was the date stipulated in the deed of agreement. The transfer of the assets and liabilities of the business was effected on the basis of the figures disclosed in the books of the assessee. The balance-sheet of the assessee as on the 31st March, 1953 showed that the building was transferred to the new company for Rs. 2,24,637/ -. The original cost of the building was determined at Rs. 97,258/- and the written down value of the building in the records of the Income-tax Officer was Rs. 57,011/ -. The difference between the original cost and the written down value was Rs. 40,247/- which the Income-tax Officer assessed as profits deemed to have been earned by the assessee. This assessment was, therefore, made under the second proviso to Section 10 (2) (vii) of the Indian Income-tax Act. It is also found as a fact by the Income-tax Officer that although no deed of conveyance was executed the premises in question had been 'sold' within the meaning of the second proviso to that section and he added the amount of Rs. 40,247/- to the total income of the assessee. The Appellate Assistant Commissioner confirmed this assessment.

( 4 ) BEFORE the Tribunal there was no dispute or controversy that the property in fact was sold within the meaning of Section 10 (2) (vii) of the Income-tax Act. The controversy arose over the question of the nature and character of that sale. On behalf of the assessee, the Associated Clothiers Ltd. , the contention was that the transfer wa

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