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Pandit Lakshmikanta Jha Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtSupreme Court of India
Decided On
Judge
Reported in[1970]75ITR790(SC)
ActsIncome Tax Act - Sections 66(2)
AppellantPandit Lakshmikanta Jha
RespondentCommissioner of Income-tax
Excerpt:
.....down value of business be termed to be income, profit and gain of petitioner - court observed that income tax authorities are only concerned with legal effect of transaction and not substance of transaction - transaction give rise to receipt sought to be brought to tax was of nature of sale - court answered the question against assessee. - section 17: [tarun chatterjee & h.l. dattu, jj] custody of child child looked after by his maternal grandmother right from his birth -grandmother financially sound had bestowed her attention throughout for welfare of child after death of her only daughter - father of child having meagre income indebted to many persons - had remarried and also had a child - father has to be out of house frequently on account of his business - child has remained..........time there was difference of opinion in the high courts on the question whether it is open to the income-tax authorities in proceedings for assessment of tax to discard the legal character of a transaction and to determine 'the substance of a transaction'. but it has now been settled by several decisions of this court that in taxing a receipt to income-tax the authorities are only concerned with the legal effect or character of the transaction and not the substance of the transaction.3. see the judgment of this court in commissioner of income-tax v. b.m. kharwarsince reported in : [1969]72itr603(sc) c.a. no. 1678 of 1966, decided on august 13, 1968.4. in the present case the transaction which gave rise to the receipt sought to be brought to tax was of the nature of sale; and it was not.....
Judgment:

J.C. Shah, J.

1. The Income-tax Appellate Tribunal referred the following question (as directed by this Court) to the High Court of Patna under Section 66(2) of the Indian Income-tax Act for opinion :

Whether, under the facts and circumstances of the case, the amount of Rs. 1,30,785 being the excess of sale proceeds of the building, plant and machinery over the written down value of the business of the said newspaper publications could, in law, be termed to be income, profit and gain of the petitioner ?

2. For some time there was difference of opinion in the High Courts on the question whether it is open to the income-tax authorities in proceedings for assessment of tax to discard the legal character of a transaction and to determine 'the substance of a transaction'. But it has now been settled by several decisions of this Court that in taxing a receipt to income-tax the authorities are only concerned with the legal effect or character of the transaction and not the substance of the transaction.

3. See the judgment of this Court in Commissioner of Income-tax v. B.M. KharwarSince reported in : [1969]72ITR603(SC) C.A. No. 1678 of 1966, decided on August 13, 1968.

4. In the present case the transaction which gave rise to the receipt sought to be brought to tax was of the nature of sale; and it was not even contended that it was not intended to be a sale. It was argued, however, that the vendor and the purchaser being the same the profits arising there from were not taxable. That contention cannot be accepted. The High Court was, in our judgment, right in deciding against the assessee.

5. The appeal fails and is dismissed. No order as to costs.


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