1. The assessee firm purchased a tailoring business as a going concern on 11-1-1945 and from that date it carried on the business of making garments for Government departments. The Income-tax Department held that this business was continued till 28-8-1945 and thereafter the firm ceased to carry on business- The contention of the assessee was that this business was continued till 28-2-1946, and the first question that arises on this reference is with regard to the date when the business ceased to be carried on by the assessee firm.
2. The first question really is a question of fact and if there is evidence to justify the finding then no further question can arise. In the statement of the case the Tribunal in paras 8 and 9 has set out various circumstances which support the finding that the business came to an end on 28-8-1945. It is unnecessary to recapitulate these circumstances, but it cannot be disputed that these circumstances do and can support the finding arrived at by the Tribunal,
But what is urged by Mr. Mehta is that there is a particular circumstance which is inconsistent with this finding and therefore the finding must be set aside, and the circumstance relied upon by Mr. Mehta is that after August 1945, a large amount of expenditure was allowed by the Taxing Department as a permissible deduction in respect of the assessee's business. What is said is that if the business ceased to be carried on, then expenditure in respect of that business cannot be a permissible deduction, and if the Department allows these expenses then it can only be on the basis that the business was carried on after August 1945.
It is clear, as appears from the order of the Tribunal, that this expenditure was not allowed because it was incurred while the business was carried on. The expenditure was incurred for the purpose of winding up the business and the expenditure was allowed only because, in order to get in the income which had not yet been realised after the business was closed, certain expenditure had to be incurred.
It is clear that even after the business came to an end the income earned out of that business would be assessable to tax in view of the judgment of this Court in 'B. M. Kamdar, In re', (1946) 14 ITR 10: (AIR 1945 Bom 442) (A), and in order to ascertain what that profit would be it would be necessary to take into consideration the expenditure incurred for the purpose of earning that profit and all that the Department has done is to assess to tax the profits earned in this business, whether at the time when the business was carried on or after the business came to an end, and allowed deduction under Section 10 for expenditure which had to be incurred in order to earn these profits. Therefore, there is no circumstance or fact on the record which is inconsistent with the finding given by the Tribunal.
But even assuming there was we are not for a moment prepared to accept Mr. Mehta's contention that although there may be evidence and materials to Justify a finding arrived at by the Tribunal, because there may be one fact or one circumstance which may be inconsistent with that finding, therefore it would be open to this Court to interfere with that finding and come to a contrary conclusion. If this proposition were to be accepted, it would really result in this Court appreciating evidence and constituting itself a Court of fact.
It is only a Court of fact that considers evidence in favour of a particular finding and evidence against that finding and on an appreciation of the evidence comes to the conclusion whether the finding should be upheld or not. But the jurisdiction that we are exercising is limited to considering whether the Court of fact had any material or any evidence which would justify the finding. Our jurisdiction is not to consider whether on a proper balancing of evidence or weighing up of the circumstances the finding was justified or not.
3. In support of this proposition Mr. Mehta relied on a judgment of the Supreme Court in 'Liquidators of Pursa Ltd. v. Commr. of Income-tax' : 25ITR265(SC) . In our opinion, the Supreme Court has not laid down the proposition for which Mr. Mehta is contending. 'At p. 273 (of ITR) : (at p. 256 of AIR) the learned Judges of the Supreme Court say:
'Although the High Court will not disturb or go behind the finding of fact of the Tribunal, it is now well settled that where it is competent for a Tribunal to make findings in fact which are excluded from review, the Appeal Court has always jurisdiction to intervene if it appears either that the Tribunal has misunderstood the statutory language -- because the proper construction of the statutory language is a matter of law -- or that the Tribunal has made a finding for which there is no evidence or which is inconsistent with the evidence and contradictory of it'.
What is relied upon is the expression 'which is inconsistent with the evidence and contradictory ofit.' in our opinion, this expression is merely a paraphrase of what the Supreme Court stated earlier,viz. that there is no evidence, and when it says thatthe finding is inconsistent with the evidence itmeans inconsistent with the whole body of evidenceor contradictory of it. That means there must beno evidence at all consistent with the, finding offact.
If there is any evidence consistent with the finding of fact, then it cannot be said that the finding is inconsistent with the evidence. In this case there is a volume of evidence which is consistent with the finding. Assuming some evidence is inconsistent with the finding even so it could not be said that the finding of fact was not justified.
4. The second contention is based upon the second question referred to us and that is with regard to a deduction claimed in the sum of Rs. 41,998 and Rs. 3,700/-. It appears that after 28-8-1945 the assessee firm sold machinery and lorry and in respect of machinery there was a loss in the sum of Rs. 41,998/- and in respect of the lorry there was a loss in the sum of Rs. 3,700/-. This loss was ascertained on the basis laid down in Section 10(2)(vii), Income-tax Act.
In other words the assessee firm realised by the sale of these capital assets an amount less than its written down value. The question is whether these deductions can be allowed to the assessee, The Tribunal has held that these are not permissible deductions. It is important to note that the year of account as found by the Income-tax Officer in his order of' assessment is 11-1-1945 to 28-2-1946.
Admittedly the business of the assessee firm was carried on during a part of this year and admittedly the machinery and the lorry was used for the purpose of the business during a part of this year. But what is urged by the Advocate General is that these capital assets were sold after the business came to an end and they were sold not in furtherance of the business but for the purpose of winding it up, and therefore it is said that deduction cannot be claimed under Section 10(2)(vii).
5. When we turn to Section 10(2)(vii) the permissible deduction is in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value, and 'such machinery' in view of the earlier sub-clauses is clearly machinery etc. used for the purpose of business.
Therefore, in order to entitle an assessee to avail himself of this deduction, all that the law requires is that there must be machinery which must be used for the purpose of the business in the year of account and that machinery must be sold and it must constitute a loss on the basis of accounting laid down in that sub-section.
The machinery has admittedly been sold, admittedly there has been a loss, the machinery was used for purposes of the business in the year of account and it is difficult to understand why the assessee firm is not entitled to the deduction. This sub-section does not require that the machinery should necessarily be sold while 'the business is actually carried on. It was sold in the year of account and it was used actually for the business in the year of account. Those two factors are sufficient to entitle the assessee firm to claim this deduction.
6. Reliance is placed on the Judgment to which we have just referred : 25ITR265(SC) , where the Supreme Court was considering the second proviso to this sub-section which deals not with deduction but with notional profits and the attempt of the Taxing Department was repelled by the Supreme Court on the ground that in that particular case the sale of the machinery and plant was not an operation in furtherance of the business carried on by the company but was a realisation of its assets in the process of gradual winding up of its business which eventually culminated in the voluntary liquidation of the company, and it is said that these observations of the Supreme Court must also be applied to a case which falls under Section 10 (2) (vii) and deals With a question of deduction and not of profits.
In our opinion, whatever the position may be with regard to the second proviso to Section 10(2)(vii), what we have now to consider is a deduction claimed under Section 10(2)(vii) and if that deduction is permissible according to the clear language used by the Legislature, then it is unnecessary to consider, with respect what the view of the Supreme Court is with regard to the second proviso which deals with an entirely different question, viz. the question of notional profits which are made liable to tax under the second proviso to Section 10 (2) (vii).
7. The Advocate General has also attempted to persuade us that the year of account should have been from 11-1-1945 to 28-8-1945 when the business was closed, and according to him if that was the year of account, men this particular deduction could not be claimed as the sale of the machinery fell outside this period and no business was carried on outside that period. It is difficult to understand how the Advocate General on behalf of the Taxing Department can put forward the contention that the year of account was different from the year of account adopted and accepted by the Income-tax Officer on the strength of which the order of assessment has been made.
It is not open to the Department now for the purpose of this argument to put forward the contention that the year of account was different from the one which the Income-tax Officer accepted, and as we have already pointed out, if that was the year of account then there is no answer to the assessee's claim that this amount is a permissible deduction under Section 10(2)(vii), Income-tax Act.
8. The result is that we must answer the first question in the affirmative and the second question in the negative.
9. The assessee to get half the costs.
10. Answers accordingly.