Case: M/S Guzdar Kajora Coal-Mines Ltd. Calcutta Vs. The Commissioner Of Income Tax, Calcutta

referred. On the case as put before the Appellate Tribunal and the High Court and the question referred with regard to the two assessment years in question we are unable to see any error or infirmity that would justify interference by us in these appeals.10. It has been strenuously urged on behalf of the assessee that since the decision of the Tribunal or the High Court could not operate as res judicature for other assessment years with regard to which assessments are still pending, the assessee would be entitled to raise all the points which are relevant with regard to the question of valuation for the purpose of deterring depreciation. We have been pressed to indicate broadly the principles for future guidance as it will be open to the assessee to raise all the points relevant for the purpose of determination of the amount of depreciation allowance in the assessments which are still pending and have not been finally disposed of.11. Section 10 (2) (vi) of the Act to the extent it is material is as follows : -"(2) Such profits or gains shall be computed after making the following allowances, namely: -(vi) in respect of depreciation of such buildings machinery, plant or furniture being the property of the assessee, a sum equivalent where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed;..................Provided that-(a) ...............(b) ...............(c) The aggregate of all allowance in respect of depreciation made under this clause and clause (vi-a) or under any Act repealed hereby, or under the Indian Income-tax Act, 1886 (II of 1886), shall in no case exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be".Keeping in view sub-section (5) of Section 10 of the Act the original actual cost to the assessee of the asset with regard to which depreciation allowance is claimed has to be ascertained for the purpose inter alia of finding out the written down value in case of assets other than ocean going ships. For the purpose of getting the benefit of clause (c) of the proviso to sub-section (2) (vi) also the original cost has also to be ascertained. The Privy Council laid down in Commr. of Income-tax, Madras v. The Buckingham and Carnatic Co. Ltd., Madras, (1935) ITR 384 (Mad) thatthe word "assessee" in Section 10 (2) (vi) of the Act refers to the person who owns the assets and who is being assessed and depreciation allowance has to be based on the original cost of such property to such person. This principle was laid down in a case where the assessee had acquired the business of another assessee and it was emphasised that the original cost to be considered was the original cost to the person who was being actually assessed and not the original cost of those assets to the previous owner of the business. Reference was made to the above decision of the Privy Council in the judgment of this Court in Jogta Coal Co. Ltd. v. Commr. of Income-tax, West Bengal, 36 ITR 521 = (AIR 1959 SC 1232 ) and it was observed :"We do not think that there is any doubt on the wording of the section or on the interpretation that has been put upon those words that the cost to be calculated for the purpose of depreciation allowance is the cost to the assessee and not to the person who makes the sale.........."Now the original cost of a particular asset is a question of fact which has to be determined on the evidence or the material produced before or available to the Income-tax authorities. Any document or formal deed mentioning the consideration or the cost paid for the purchase of an asset by an assessee would be a piece of evidence and prima facie the statements or figures given therein would show how much the cost of the asset to the assessee is. But if circumstances exist showing that a fictitious price has been put on the asset or there is fraud or collusion between the vendor and the vendee and that there has been inflation or deflation of value for ulterior purposes it is open to the Income-tax authorities to refuse to accept the price mentioned in the deed or alleged by the assessee and to ascertain what the actual original cost was: See Pindi Kashmir Transport Co. Ltd. v. Commr. of Income-tax, Lahore, (1954) 26 ITR 595 (Lah) and Kalooram Govindram v. Commr. of Income-tax, Madhya Pradesh, Nagpur and Bhandara, 57 ITR 335 = (AIR 1966 SC 4 ).In this view of the matter it is open to the Income-tax authorities to determine and to the assessee to show whether the good-will of the business is or is not included in the consideration or the price paid for the acquisition of the asset. In other words even if it is not expressly mentioned that good-will has been sold it can be shown and ascertained by evidence whether the same has been purchased or not by the assessee. The expression "good-will" has been considered and explained by this Court in S. C. Cambatta and Co. P. Ltdv. Commr. Excess Profits Tax, Bombay, 41 ITR 500 = (AIR 1961 SC 1010 ) and nothing more need be said about it. The principles stated by us are by no means exhaustive and are mainly illustrative.12. Keeping in view the facts of the present case we may make it clear that if circumstances exist for going behind the valuation as also the allocation given in the deed of conveyance it was and is open to the Income-tax authorities to determine the valuation as well as the allocation between depreciable and non-depreciable assets.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]9. Learned counsel for the assessee has assailed the decision of the High Court on a number of grounds. It has been urged inter alia that the High Court had not kept in view the general and well established principle that the statement with regard to valuation contained in a formal document should be prima facie accepted ascorrect. There can be no justification, it has been pointed out, for any court or Tribunal "to rip up a transaction not impeached as dishonest and not proved to be such, merely because the company may have paid an extravagant price for their property". A great deal of emphasis has been laid on behalf of the assessee on the report submitted by the experts justifying the valuation given in the deed of conveyance. In the absence of fraud, collusion, inflation or false transaction made with an ulterior purpose the Income tax authorities, it is said, were precluded from going behind the agreement of purchase in determining the purchase price fixing their own valuation. Theother point canvassed on behalf of the assessee is thats not included in the valuation given in the deed of conveyance nor was it ever intended that anygoodwill of thebusiness should be sold by the vendor company.This contention, however, appears to run counter to what was argued before the High Court and the Tribunal nor can it be said to be covered by the question which was referred. On the case as put before the Appellate Tribunal and the High Court and the question referred with regard to the two assessment years in question we are unable to see any error or infirmity that would justify interference by us in these appeals.10.It has been strenuously urged on behalf of the assessee that since the decision of the Tribunal or the High Court could not operate as res judicature for other assessment years with regard to which assessments are still pending, the assessee would be entitled to raise all the points which are relevant with regard to the question of valuation for the purpose of deterring depreciation.We have been pressed to indicate broadly the principles for future guidance as it will be open to the assessee to raise all the points relevant for the purpose of determination of the amount of depreciation allowance in the assessments which are still pending and have not been finally disposedion (5) of Section 10 of the Act the original actual cost to the assessee of the asset with regard to which depreciation allowance is claimed has to be ascertained for the purpose inter alia of finding out the written down value in case of assets other than ocean going ships. For the purpose of getting the benefit of clause (c) of the proviso to(2) (vi) also the original cost has also to be ascertained. The Privy Council laid down in Commr. ofMadras v. The Buckingham and Carnatic Co. Ltd., Madras, (1935) ITR 384 (Mad) thatthe word "assessee" in Section 10 (2) (vi) of the Act refers to the person who owns the assets and who is being assessed and depreciation allowance has to be based on the original cost of such property to such person. This principle was laid down in a case where the assessee had acquired the business of another assessee and it was emphasised that the original cost to be considered was the original cost to the person who was being actually assessed and not the original cost of those assets to the previous owner of the business. Reference was made to the above decision of the Privy Council in the judgment of this Court in Jogta Coal Co. Ltd. v. Commr. ofWest Bengal, 36 ITR 521   = (AIR 1959 SC 1232  ) and it was observed :"We do not think that there is any doubt on the wording of the section or on the interpretation that has been put upon those words that the cost to be calculated for the purpose of depreciation allowance is the cost to the assessee and not to the person who makes the sale.........."Now the original cost of a particular asset is a question of fact which has to be determined on the evidence or the material produced before or available to theauthorities. Any document or formal deed mentioning the consideration or the cost paid for the purchase of an asset by an assessee would be a piece of evidence and prima facie the statements or figures given therein would show how much the cost of the asset to the assessee is. But if circumstances exist showing that a fictitious price has been put on the asset or there is fraud or collusion between the vendor and the vendee and that there has been inflation or deflation of value for ulterior purposes it is open to theauthorities to refuse to accept the price mentioned in the deed or alleged by the assessee and to ascertain what the actual original cost was: See Pindi Kashmir Transport Co. Ltd. v. Commr. ofLahore, (1954) 26 ITR 595 (Lah) and Kalooram Govindram v. Commr. ofMadhya Pradesh, Nagpur and Bhandara, 57 ITR 335   = (AIR 1966 SC 4  ).In this view of the matter it is open to theauthorities to determine and to the assessee to show whether thegoodwill of thebusiness is or is not included in the consideration or the price paid for the acquisition of the asset. In other words even if it is not expressly mentioned thathas been sold it can be shown and ascertained by evidence whether the same has been purchased or not by the assessee. The expressionhas been considered and explained by this Court in S. C. Cambatta and Co. P. Ltdv. Commr. Excess Profits Tax, Bombay, 41 ITR 500   = (AIR 1961 SC 1010  ) and nothing more need be said about it. The principles stated by us are by no means exhaustive and are mainly illustrative.12. Keeping in view the facts of the present case we may make it clear that if circumstances exist for going behind the valuation as also the allocation given in the deed of conveyance it was and is open to theauthorities to determine the valuation as well as the allocation between depreciable and