Commissioner Of Income-Tax, Kerala v. K. B. Kalikutty And Anr

MAR MIR, We Ho Ato Rifagal (aa) ate TH TET(The Commissioner of Income-Tax, Kerala K, B, Kalikutty (dead) andanother)(2 sae, 1968) (sate Ho Mo me, Ae ciaeaatjant Fo aro Taz) soma aaa use 1922, aretl0 (2) (vii), feata wega—1949 & afafaaa 67 sit aa dentfsa—geat afar | Rralfedt aa Sena ar BAIT BAT A, WTTea MIA Gaaa as FB,at 16 nea, 1959 A ana gar wm, aia HR aT as ef as sare’, weaeayatg wat wr fama ae fear aaaz snfhax 2 aat sh fay stad ayesaa wafafar yeah aa wat at mer 10(2)(vii) & fadla oegEada euaa aa fratfia fear) atta a aaa maa maH (Cale) aFraiftel at ga eat at aria ax fear fe ah erga sre a srafta axfeay mar ar, Ha: SH STAT F Mey TAMA HA IT HT Al AMAT AT SHAT|afascy 3 stag wa cae a ge dtr Gifs seg) fe frafeat A aaaai % aa HB aaa as ad Tee at ae gala ea aatfama a aHat Se sade % aela ae GTA ar sat 21 fg sa AIAG sea TATAat Rizfaa Pear var at sal ga TUT Gz fe Gena sarah F ales dqaaa dar ® aieae wt aftaniaa at fear var at, ae BPafaaifea fear fs ogaTacH wt 10(2) (vii) & wala arr H we 7 Grats adt 2 | ga eqiaraa & aite fae ara oz, dle AA BIA EC, afafaaifca— ae area at aa ac at fa aah we Paw Bea BE aE HAT AY ANTfama ur, ag aapaa alu, Faiths fang 1949 4% safalqaa 67 aie ate10 (2) (vii) & facta qa & deified az fea ara $ Gara feat AAT aT MAB MFA, BA Tara Ho ato srferget nile [rate gaz] 119° za cararaa gia sfastua fate & sqrt asa eqralaa ar na astanfia} anar ay sa sega nina A fies, 1949% afafran 67 areages & egiua faz wa gaa fratea ay H fear var dar saaftadaat wecl a, ST sa aan cit weaenfta feo ae F sata‘whetherduring the cntinuanceof the business or after thecessationthereof?(aR ara } way wa% ata ay az sakama wa B wpa) saar ava wa fear war afer ae faegazag2 fis afe naa, uglavd ar dais at era & aig wae eka aymI RB anaat a H oxaa faaafear era at Parana saquae & waar BUay Flar|aa fawanwea wa ga Bl we sqaAacvfear Pa quaa sa agr A at ay atm sa fang anaat anifaRagatg a ata fear narét,at ag at wer st aaarfe famantea srsig Oa fimy st,St RITA ee aA aE BAIA axa B oAeaT a Pear narat, ateae e} aff & aoafea sear ar TIS SAM, ANT aay uTAiT astae fale, age,1964 (8) cao ate mite189, 95195 az, sae MATA, Brat aayRe ae Savr ote greeter fafets, 46 ge eo sxe 135;MAG HYAA, BLA FAH So Sco TAHT faeAs, 66 wiko Zo azo725 ak feo fafeatzd sim geet fala) sam saat aga, fare1954 Gao ato mMxo 767 8 ade aarar TAT| MAT Mara, FIR VATE MeTea fafaee(1965) 1 qao dheane, 700 fafes fear marl. fafaa saat sifiaticar : 1966 ado714 arely fafa sala | 1963 % Go 62 Ha Mae fadtya AAA A Re seq aaa >anda 17 faarar, 1964 aa fada mle meafaag fats gargs aatet ne acta | ‘ saat a se 2 saat a se 2 a se 2 se 2 2Beat wito Uae Bag, zo go UA-|aaa At do sto wataf go 2a ATABat Mo Wao FeeRI BAW, HAT\aes aerat, We gat afar Ha-\}.alat areata Paar eqqaifagft qo azo stag 3 fear | 120 geaaa saree Peta afar — [1969] 1 saofatoge aratrafa Naz— fate gata Natal as ca ade A amar waa set ae? Pegray 2aq Dez, 1922 a ser 10(2) (vii) & faeala aeegn ar sta steRdaa ae walezaa aed ae Peet Prafftad st ofeaat ar areare aq ateSader s fac Pear nar fama sa qean ® wana ware alt ar aearawa 8 frata gar| fraffeel gare mez faaF arra as Ba sr Frat star aTPraffidy A eal qdaat ad} ata, Ht 16 mae, 1959 at ame garwleg any as dad wate’ firg sek saat fama 16aaea, 1958 ale 13aaah, 1959 & ala Peart say @ at qd 78,000 go F famaaz at vatale seq aie ag 35,000 eat H| sfinaeaeeota ge Ha vA 1,13,000sat at | fratftatA za ara wr cra far fe sad 2,000 eat aerat &feaS| raat oifmat225,000 waz at wan Ge qea he way faa at akac afufaatftafear fa ae car gstafiear Bat sudads afata86,000 aga at tHq Ha ga gat ary faa TaI—gaat ar fanaqea==—° = 86, 000 aaa g: aat ar safafaa zea 36,712 aaa 49,288 =a2 COMMISSIONER OF INCOME-TAX, KERALA K. B. KALIKUTTY AND ANR. August 2, 1968 (J. ·c. SHAH, V. RAMASWAM! AND A. N. GROVER, JJ.] Income Tax Act, 1922, s. 10(2)(vii), second proviso-as amended by Act 67 of 1949-Scope of. The assessee was running a business of plying buses and during its previous year ending on August 16, 1959, the buses h:lli been plied for part of the year but were sold the~eafter. The Income-tax. Offic~r assessed c the difference between the sale pnce Of the buses and their written down value to tax as profit under the second proviso to s. 10(2)(vii). In appeal, the Appellate Assistant Commissioner rejected the assessee's con-tention that the business had been transferred as a whole and therefore the profit in question could not be taxed. The Tribunal also dismissed an appeal taking the view that the buses had been plied by the assessee for part df the previous year and the profit on the sale of these buses was taxable under the said provision. However, the High Cou'ft, upon a D reference, held that the amount ·in question was not assessable as pro.fit under s. 10(2) (vii) on the assumption that the whole of the bus service business. had been wound up during the relevant period. On appeal to this Court. HELD : allowing the appeal : Even on the assumption that the sale of the buses was a closing down or a realization sale it would nonetheless be taxable since the sale was made after the amendment of the second proviso to s. 10(2) (vii) by Act 67 of 1949. [533 F-0] According to the law laid down by this Court the view of the High Court would have been sustainable if the sale in the present case had been effected during the assessment year prior to the amendment o'f the proviso F by Act 67 of 1949. The critical words which were inserted by that pro-viso namely, "whether during the continuance of the busines·s or after the cessation thereof', must be given their proper meaning. It is quite plain that if the building, machinery or plant is sold during the conti-nuance of the 'business or after the business ceases, the sale proceeds would be liable to tax in accordance with the pro:viso. When the legislature clearly provided that the proviso would apply even if the sale was made after the cessation Qlf the busineS"s, it is difficult to conceive that it was G intended to exclude from the ambit of the proviso a sale made for the purpose C\f closing down the business or effecting its cessation. [535 F-H] Commissioner of Income-tax, Madras v. Express Newspapers Ltd., Madras, f1964] 8 S.C.R. 189, 195; Commissioner of Income-tax, Kera/a v. West Coast Chemicals and lndus·tries Ltd., 46 I.T.R. 135; Co1n1nissioner of Inr:ome-tax, Kera/a v. R. R. Ramakrishna Pillai, 66 I.T.R. 725 and The Liquidators of Pursa Limited v. Commissioner of Income-tax, Bihar, H [1954], S.C.R. 767; distinguished. Civ1L APPELLATE JuR1smcnoK :· Civil Appeal No. 714 of 1966. Appeal by special leave from the judgment and order, dated September 17, 1964 of the Kerala High Court in Income-tax Referred Case No. 62 of 1963. R. N. Sachtlury, T. A. Ramachandran and R. D. Sharma, for the appellanL C. S. Venkateswara Tyer, Sardar Bahadur Saharya and Yougin-dra Khusa/ani, for respondent No. 2. The Judgment of the Court was delivered by Grover, J. The sole question for determination in this appeal c by special leave is whether on a true interpretation and construc-tion of the second proviso to s. 10 ( 2) (vii) of the Income Tax Act 1922, sale of the assets of an assessce effected for the purpose of closing down the business would be covered by that proviso and would be assessable as profit. gaa: aaart aifeac a ape 10 (2)(wii)&fadla waa s wala49,288 wat at wan at arafaaiRafeat) aeramga (ade)Raga atte Ffaaiftet A aeacts afe qh aga aRATet weafta ae fear aa at,ma: sa saadSF seta feel at arIe HTal amar a ana| ga aaa at aman aga (ada) 2 c4 aragt ary at fear fe ae dagger we qea afea atat fama ara arate aati xa% gre srftadt & afasig wir a feet gare, aus waaieat ar Peel care at satay araltar star aét ear 21 saat aleaha4 aga g:adt % qeq ¥ wa H 86,000 aqk F maanaasdia 8 ale faaz adt ar fag fada aan & omla ara am 3% agom 449,288 coot wag afaehy & die A fae a| afaarqarag aa a fk frattdt a qaqa ad & alua sy ena as ad aarseita gafaa <4 aa § fam 8 ec aa a oH ated & ata ae amaa ata 2) afaaey 2 saa ade mee A saat Byes, ageaaa wrare eqaaqd fafate age’)4 ca varnay & fafigaa (1) 1964 (8) Gao ato mTo 189 GE 195 AT SMAST BAYTA, BA AAA He so arfeager only "ero maz] 121 qt erat Feat laa fafigaa 4 ae cya sor ar fe var fadta wage aaary dat oa Pe areata} oRertoa shear F fama fear aaa, wk ewarate at gas saat fe xa cara A sa aa A fea weaT F sa wraz faare Peat at st eq sear strata fafaat (arefaa usal se faaatt dgiaa) sfaftaq, 1949 (1949 gr 67) [Taxation Laws (ExtensiontoMergedStates and Amendment) Act,1949 (67 of 1949)] atar ll eer dara fag Ra ga art afsaey | ag at afifratteaPear fa eat AaBR acdt ax SNTTIT BATT, BLT TNA Te HeSfraca wie auseia fafaes (°) Axecarne arr featwarfafigaa at ary vet ear| fratfect 2 afwacq&@ aq waea fear feae aA Ht ssasararera at fehea at ate frafafad oza,Fehrfear wat—Gaar AIAaattae ate afefeafeat A are 10 (2)(vii)3 aaeit}ale a&wr§49,288eostafer aay afsaeaa ca oea at me faeet adt ferar arf&% aaaasrarate & aera aeqay aa Bay F areare ar afeaarsa Befear Tar aT,anit asa earaaa Asal aregr at sgt at sae fearl ae aarar afea3 fs fea care Sea earareaa aT ae sua aaaiaa 2 fi afuaeq 3 xaacta A waza: Haz ae feat a Pe Peet aa Baez BAT AT AToa area fans ar) dat feafe A ea ae ar IAT ated 2 st aTHTHAT, SLA AA MLO Ae WAHT fueaé (°) F ate ana varor | Pea ener na 2 fis ag aremt.ae HA oe ot PR sat at far saear az erat 2 ar ava fama2, ae aera eter salle faq 1949afufan 67 ata feada geae & dalfea ae fez ara se Tear famat at | 38a ealaaa a meat AAA F TART MAS, ATT AalaT TFATTeqatae faite agraHo afeefaa di aat & safe fae fear stfama-minat at fkdta qean % aeta sarfta ata F faq wrazas etal3) gq euaaa at ae frac ar fe ada ad gt ad gs Fife — haa ee (2) 46 mIgo ato wITo 135(3) 66 ato eto mIto 725Bye fio qo 10-16 oat Gl PRT HAT BT FT ETAT al ar Ga att Paws ar at arcane ét qaaraafear er sata ar ofeurmeaaa aeafifaatfta Pear varPe faafira aya fraifeat:% ae Botte craea F frex fear ara arte | fadta wean & fagaa ga cae oe — “S 10. Proviso (1) (2) providedfurther that where the amount forwhichany such building machinery or plant is sold (whether duringthe continuance of the business or after the cessation thereof)exceeds thewritten downvaluesomuch of theexcessasdoes not exceed the difference between the original cost andthe written down value shallbe deemed to beprofits of theprevious year in which the sale took place:?’ 1949 & mfefsan 67 gia fae ve dqtaa 8 gq A gee, TT Hse A & faaraad Bate a sd afar ar aaenfia Pq ae 31 fefaleatea,ene gear fafazs aaa saaz age, fag (4) 9 gear fafazs aaa saaz age, fag (4) 9 fafazs aaa saaz age, fag (4) 9 aaa saaz age, fag (4) 9 saaz age, fag (4) 9 age, fag (4) 9 fag (4) 9 (4) 9 9 Fae1945-46 frajey ag § gear fatute qe atey at srlafedl @ sera gaUt aL 1942 8 aae mit aa strat & arqal sae F fama sfae 14fie ac feeg AS anata frat|fearaz, 1943 9 as gee facies farmat fae Fratftet sa at ufeat, vadt, aetad, drat arfe at aaa %fag agaa at aay at sa atatearara %, faant atid} sar tat at ‘dam faleatea,ene gear fafazs aaa saaz age, fag (4) 9 gear fafazs aaa saaz age, fag (4) 9 fafazs aaa saaz age, fag (4) 9 aaa saaz age, fag (4) 9 saaz age, fag (4) 9 age, fag (4) 9 fag (4) 9 (4) 9 9 Fae feedt § ag ga gaye et azar 2 — The assessee was running the business of plying buses in the name of Kumar Motor Service. During the assesscc's previous year which was the year ending August 16, 1959 the buses had been plied for part of the year but they were sold between August 16, 1958 and January 13, 1959. Two of the buses had been sold for Rs. 78,000 and the other four for Rs. 35,000, the total con-sideration received being Rs. 1,13,000. The assessee claimed a payment of Rs. 2,000 a~ brokerage. The Income Tax Officer fixed a sum of Rs. 25,000 as the route value and held this amount to be a capital gain assessable to tax. On the balance of Rs. 86,000 he worked out the profits in the following manner :- The Income Tax Officer consequently assessed the sum of Rs. 49,288 as profit under the second proviso to s. 10(2)(vii). Before the Appellate Assistant Commissioner in appeal the asscssee contended that the business had been transferred as a whole and therefore no profit could be taxed under the aforesaid provision. This contention was rejected by the Appellate Assist-ant Commissioner on the ground that the transaction was only of sale of buses, along with the route value and this constituted sale of major assets but the business as such was not transferred 'or handed over to any party. Before the Income Tax Appellate A TribWJal the determination of Rs. 86,000 as the value of six buses was not disputed and the only point agitated related to the assessability of the amount of Rs. 49,288 as business profit under the second proviso. The tribunal was of the opinion !hat the buses had been plied by the assessee for part of the previous year and the profit on the sale of these buses was taxab'.e under the .s~d B provision. The tribunal in its appellate order noticed the declSlon of this Court in Commissioner of Income Tax, Madras v. Express Newspapers Ltd., Madras(') in which the question arose wheth~r the second proviso would apply where the sale had been made Ill the process of winding up of a company but distinguished it on the groWJd that this Court in that case considered the second proviso as it stood before the amendment made by s. 11 of the c Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (67 of 1949). The decision of this Court in Commis-sioner of Income Tax, Kerala v. West Coast Chemicals and Industries Ltd.([2 ]) was also held by the tribunal to be inapplicable to the facts of the present case. D The assessee moved the tribunal for making a reference t<> the High Court and the following question was referred : "Whether on the facts and in the circumstances of the case, the sum of Rs. 49,288 was assessable as profit under the provisions of section 10 ( 2) (vii) ?". -(2) ag ag steal fe set 2B uaa, ANad atdiah fawr (azTe Sat F Deter % aera Pear mar ear ae saat ane Fswag)a sta aH wafeied qe a afta dad ta amfiarH a cad wa a,at qa ama att nafafaa qer ada weave afaga a, sa gaat atBEEP aear arecat, Paait Pe Rawr Pear var et 2” te Ay Saat agra, dea gare He sto silage aly Fate Maz] 123 Soha tata) Aara adaat aahuae wa sae s aeradat sr ate ar, PHI aegdt Haq, 1944 am acrat fama atah teh | eeaatSt20 qa, 1945@sgr a ana gat) waa afar a afhfaattiafear fe aatad ale dist} fama go arr ae 10 (2) (vii) % aeitafala & afvarta 21aeas sage (ata)ae waa wie\ sfaeeqy 2sa mee at ge ae al ama sa aaTET a AATmatt fet sea H saat ga sara # at ag| ae afafratfaPear nar fi atadh at miramoar Ba ae Re BAT aT a ARAdatc dtat ar fa seaat oftenmaafear A ae war atl aqfianraa, Pea at sea aa gar wafe aadt ar ARIS sare elmari afe fat & ase} Pweg at oftaaraa a ef @ saat aarfeaat arMT 7 AAR BTA AT BAT BT Aaa GTA Ata AY fear are at afs natadt ste dist ar stata fehaa at adt Pear var at aa:, wre 10(2) (vii) tat feet agtad ar dia % fama at ay ad Vat| srTATSyre, @aat aia Fe she Bases exe srsyis fafate 4 frac30 aia, 1944 a aaa QA awa Farad} fac seat F frateq @ sevegar ar | fralftel seat 2 arearz az ea at cf a az 1943 8 oe ahaaqITaA st “faa, vad, stat ale aatad F far % fae cH see fear |ma A dara aa A safienPear ake oy are aa Taste F a Te ATBU St| ka UT A oe wu F sfeafaa aeafa F ara-arr GI wastale ams ar fara dt aftnfaa a ot fafhalg § ogee a8 a att Tt saggueaftnfaa adt eae 21 fea a sa anit ae St waraat ate ae% fama @ agear ga T areae 8 wea TT ATA a, FT Pate ear AUT |fralfedt A az aca ct Peas ce mca fT aT wa: EE THA TT aR eTMia a aaa) ae sfaruifea. fear var Ps ae fama % aeat at ef A vadea aifaat & fatale. § sge NA aa carat ale araat ar fasT wITATaq at 23 ae eet anfeaat BF area F faq Faw aa ofeasa fsa aT |ma: et FA ar atfea seen etadt Gar) Blase BAW, AIT Facrane asta fafie]s, wart a, ats dar fear & (aes sasqaraa A ada Aaa Haga ales maweaa Pear’,sit sea sor oT ae1949 qa dar Bad fee ag frag a daa gaa! ae aaray1946-47 3 ddfta ari earafeafe aaa 3 (aa fh A sa ana a) gaaararaa st faa 33 ana fafeateq sna grat fafes 4 fen agfifeaa & sfaw sg aa fafigadt & off dt ee Pear, ae géatsqarat at adar al F ova fafiafetaa ata tet wat ar afar Fearait fama-sraet at ater 10 (2) (vii) & fadla aeas % aetr saute ae F {24 {[1969] 1 eqoftoqe faq mazas eat} e— “(L) ag ara fralftat § gat qdaa ad at sae Pat ar} alas TMA Et; (2) 3a Gran # ag qgtad saw at ad a, ae (3) sa rated or fama ara F ae cel B ataa et Paar aa Cafe see St eT aA aT gah ohana & faq Peat ar a” E Although the tribunal had given no finding that the whole of the bus service business had been wound up during the relevant period, the High Court proceeded to answer the question on that assump-tion. It is difficult to see how the High Court was justified in saying that the tribunal had apparently accepted the contention that the sale was a closing down or a realization sale. In such F a situation we might have followed the course which commended itself in Commissioner of Income Tax, Kera/a v. R. R. Rama-krishna Pillai('); but we are of the opinion that even on the assumption that the sale of the buses was a closing down or a rea-lization sale ·it would nonetheless be taxable since the sale was made after the amendment of the second proviso by Act 67 of G 1949. The High Court in the present case referred to the obser-vations in the Commissioner. of Income Tax v. Express News-papers Ltd., Madras(') and to the three conditions laid down therein for bringing the sale proceeds to charge under the second proviso. The High Court thought that the third condition was not satisfied as the sale of the buses was a closing down or a realization sale which was a mere incident of the winding up H process of the business. It was consequently held that the question (1) [19641 8 S.C.R. 189, 195. (2) 46 I.T.R. 135 (3) 66 I. T. R. 725. referred must be answered in favour of the assessee and againsl the Revenue. Now the second proviso was in the following terms : Proviso ( 1 ) ...................... : .. . {24 Rae HS Se vet Pe ea carrera ae wfeafaa Patemaar seaaaa Bt Ra ey aafaa gt asa asa sega ATMA Afier, 1949 3atafran 67 ait ovqs & death fee a & waa rate at & Pear varalat | sa afadaard (critical) gazt Rt, Ht sa Gg Ser Beaearfsa fazmz z,CbIGe “whether during the continuance of the business orafter the cessation thereof” (ao are & ANG,AB aera ar ae Taeaaa et MH GRANT) Saar aa at Ray sear afk) ae faegE IE@ fe afe aaa, aghad ar daa at arcane ® ae teaaherar ar BAIT FSHre et stl H aeary Pema Peat ara dt fma-mam sa eas % FAIRUT eT| Rafe sea a Aaa add2 Pe ate fama sree we FA ATaa #4sels @ fea nar et at ear ae quae wey et eta |wa faaraavee 9 ga aia st eae sqaee ae fear? Ps qaqa aa car a otGUTRT sa fase sreare at anifta B qeai et atta fear war a, at aevat ator st asat Ps aranesa at arma ga aaa & .qdaa Bteaa &aaa cafe % sgt fae at aega at aff a maafSa azar art. tarSRTafraria: aa| Hae as at aa saad} fidaa He aneGaal4 arr aa, fg gfege frdar& fag at star act at at%| HAT MAA, AAS aaa WaT Nera faze") Ta aa a fata H ga caraaa 3 1949 F quga # Peuac data 3 TAra Bt RISEPear 2 az gear & qdaa GRieaaH afisfaa sa ata wat a oftagar fear @ ot detaa 8 qa facta cage at arafae mazes dalati at aa Sa aaa sae fear var ar ae ca oe 2| “ae 1 SRA F ag UR s aaa we sast anita > RAK” Tee maifea wast adtBs ged sqva a fahieaat F,wae ez afsaa a, ga earmaT a ae afafaatfta Pear ar fsSH WIESt He SS faq ae mays 2 Pe aatad a starz Pa-* SHARC HATA, BEA TAA Ho We eiager sey [Fare AtaT) 125° & ava fet oa 8 oa et fans fear war etl ka UTA FATA FTA% fac ga wa er ate ae fear 2 1” SH Aa eae: ae afta aed F Pe eas F Seta aA Te geal Aa ala Uaa, feast afrata qaqa PafreaT A aegs & amas fac fear var a,fier Rat| ag ad oft fe matador fame witare ate FS aterr et PearTat et at Pe aa HT HE HA AT Sas oaaraa F fa lak as art saadmaq % qhumeass ae wd Gat wae at Faq sua a ad deex statargut at¥ar sake St Pret By xt at faeneala Sahara we arel srar2 ag ae ae Lar 2 Pe fraffed ar aet 2 ale gaeat Aisgiaaad sqe at as @aradt | afeawe are fea aq fag %maar cea HAG A lat wa Paar Ft afar ae ear fH sera gat& fia a saa, aur wast atfhat grr waatfea aA, sey 10(2) (vii) PS facler oeege F aaene sera AT | sega naa 9 false aga ar sae asiens ale faite & eae at ata | aeqraeasd ade @t afer ase az at wdt2, we sa aaawar fear var sae satatae Fear sar 2 || mista a ea at afaa fear? fe frathetSeca fates ofafate, Fodto sifaget at meq fade esta weed ata 8 ga et ag att ofreceratae Praag Qa fe ag afaPrad at are 66 (5) F acta gag st aaasa fifi ofafafy at aa &, ate aan & fafea fafa} saa a aacwa & sara & art & faye 2|ne atta Ase aX ah Te | The words within brackets did not exist before the amendment wade by Act 67 of 1949 and were inserted by that Act. In The Liquidators of P11rsa Limited v. Commissioner of Income Tax. /Jihar( [1 ]) the controversy arose out of the proceedings relating to the assessment of Pursa Limited for the assessment year 1945-46. Attempts had been made from 1942 onwards to sell the ~ntirc business of the company but without success. In December 1943 an agreement was executed whereby the assesscc agreed to sell all the lands, buildings, machinery, plant etc., used in connection with the sugar factory which was being run by the company. On the date of the sale the company possessed sugar stocks valued at Rs. 6 lakhs which the company continued to sell up to June 1944. The company went into voluntary liquidation on June 20, 1945. The Income Tax Officer held that the profits of the sale of ni:ichi-nery and plant were liable to assessment under s. 10(2) (vii). The Appellate Asstt. Commissioner and the Income Tax Appellate Tribunal affirmed that ordc.r. After the matter had been taken to the High Court it came finally in appeal to this Court. It was held that the intention of the company was to discontinue its busine.'5 and the sale of the machinery and plant was a step in the process of the winding up of the business culminating in the voluntary liquidation of the company and even if the sale 0f the stock of sugar be regarded a~ carrying on of husincss of the com-pany and not a realisation of its assets with a view to winding uo. the machinery or plant not having been used at all. s. 10(2) (vii) would have no application to the sale o~ any such machinery or plant. The controversy in Commissioner of Income Tax, Kera/a v. West Coast Chemicals and Industries Lrd.(') arose out of the assessment of the company for the accounting year ending April 30, 1944. The assessee company had entered into an agreement (!) Jl9541 S.C.R. 767. (2) 46 l.T.R. IJl A in I 943 for the sale of the lands, buildings, plant and machinery of a match factory with a view .to close down the business. The purchaser made default in payment and a few months later a fresh agreement was entered into between· the parties for the sale of the property mentioned in the first agreement and also chemicals and paper used for manufacture which had not been included in B the first agreement. The Department sought to assess the profits derived from the sale of the chemicals and paper as profits from the business. The assessee contended that it was a realisation sale and this amount was not liable to tax. It was held that on the facts of that sale the sale of chemicals and materials used in the manufacture of matches was only a winding up sale to close down the business and to realise all the assets. Therefore the tax liabi-c lity was not attracted. In Commissioner of Income Tax, Madras v. Express Newspapers Ltd., Madras(') a decision on which the High Court relied a great deal in the present case the question again arose out of the assessment made before the amendment made in 1949, the accounting year being 1946-47. Reference was made by Subba Rao, J., (as he then was) delivering the D judgment of this Court to the decision in the case of The Liqui-dators of Pursa Limited([2 ]) as also to other decisions and after an examination of the relevant provisions the following three conditions were laid down for bringing the sale proceeds to charge under the second proviso to s. 10(2)(vii) : Vasu GuptaAdvocate " ( 1 ) During the entire previous year or a part of E it the business shall have been carried on by the assessee; ( 2) the machinery shall have been used in the business; and ( 3) the machinery shall have been sold when the business was being carried on and not for the purpose of closing it down or winding it up." There can be no doubt that according to the law laid down by this Court the view of the High Court would have been sustain-able if the sale in the present case had been effected during the assessment year prior to the amendment of the proviso by Act 67. of 1949. The critical words which were inserted by that proviso namely, "whether during the continuance of the business or after G the cessation thereof'', must be given their proper meaning. It is quite plain that if the building, machinery or plant is sold during the continuance of the business or after the business ceases the sale proceeds would be liable to tax in accordance with that pro-viso. The only question therefore is whether when a sale is made for the purpose of closing down the business or effecting its cessa-H tion the proviso would be inapplicable. When the legislature clearly provided that the proviso would apply even if the sale (!) 1954 8 S.C.R 189. (2) [!954j S.C.R. 767 was made after the cessation of the business it is difficult to con- ceive that it was intended to exclude from the ambit of the proviso realisa\ion sales of the nature contemplated in the previous deci-sions of this Court. Such a result would be illogical. Even if logic is not necessarily to govern the interpretation of a taxing provision, the rule of reasonable interpretation cannot be ignored. lndeed this Court in a recent judgment Commissioner of Income Tax v. Ajax Products Ltd.(') clarified the position ahout the effect of the amendment made in 1949 in the proviso and reference was made to the three conditions for the applicability of the second proviso before the amendment which were laid down in the pre-. vious decision of this Court. It was then observed : "the words whether during the continuance of the business or after the cessation thereof were not present in the unamended proviso. In the two decisions cited earlier, in the absence of such words, this Court held that to attract the said proviso the machinery shall have been sold before the business was closed down. This clause omits that condition for the exigibility of the tax". The above observations clearly show that the amending words in the proviso eliminated the third condition which had been laid down for its applicability in the previous decision namely, that the machinery shall have been sold when the business was being carried on and not for the purpose of closing it down or winding it up. Once that condition disappears as a result of the amend-ment only the first two conditions remain and all that has to be seen is whether during the entire previous year or a part of it the business has been carried on by the assessee and that the machi-nery has been used in the business. Both these conditions, according to the finding given by the tribunal, exist in the present case. The result would be that the profits arising out of the sale of buses in question as determined by the Income Tax Officer would he chargeable to tax in accordance with the second proviso to:;. 10(2)(vii). The answer to the question referred in the present case has to be in the affirmative and against the assesscc. The appeal is consequently allowed with costs and the answer returned by the High Court is discharged. We arc informed at the Bar that K. B. Kalikutty one of the legal representatives of the assessee had died before Spec