Case: Maharajadhiraj Sir Kameshwar Singh Vs. Commissioner of Income Tax, Bihar and Orissa

The facts which led to this appeal may be shortly stated. The appellant was the sole proprietor of the business which he carried on of publishing two newspapers, namely "The Indian National" and "Aryavart" and which business had some assets. Theauthorities had from time to time allowed to the appellant depreciation on the said assets for several years. In the accounting year 1356 Fasli corresponding to the assessment yearthe appellant converted his said proprietary business into a private limited company. The entire capital of theprivate limited company came out of the pocket of and was subscribed for by the appellant. The said newspapers publications and their assets were transferred from the sole proprietorship of the appellant to the newly floated private limited company of which the entire share capital was subscribed for and paid by the appellant. The appellant was allotted by way of consideration for the said transfer 25, 000 shares of the said company out of which he held in his own name 24, 950 shares, the remaining 50 shares having been allotted at his instance to the names of his nominees by way of directors qualificationthe said transfer certain valuation was put on these assets. The written down value of the building as on the 30th September, 1948, was Rs. 29, 669, the original cost thereof including the cost of subsequent additions being Rs. 49, 270. The written down value of the machines and the plants as on the 30th September, 1948, was Rs. 1, 19, 368 as against the original cost thereof including subsequent additions which came to Rs. 2, 30, 552. There was thus a difference of Rs. 1, 30, 785 which represented the total amount of depreciation which had been allowed by theauthorities on these assets up to that date. When the valuation was put on these assets for the purpose of the transfer, the valuation of the building with subsequent additions showed an appreciation of Rs. 54, 599 and the appreciation in regard to the machinery and plant together with subsequent additions came to Rs. 1, 51, 744. The appreciated value of these assets therefore aggregated to Rs. 2, 06, 343 which was in excess of the depreciation amount already allowed namely, Rs. 1, 30, 785. TheOfficer while assessing the appellants income for the assessment yearwas of the opinion that the appellant had sold to the private limited company these assets at an appreciated value and realised profits thereby and since the difference between the original cost and the written down value, namely Rs. 1, 30, 785, was less than the appreciated sale price of Rs. 2, 06, 343, the entire amount of Rs. 1, 30, 785 was income, profits or gains in the hands of the appellant liable to be assessed during the relevant assessment year, and assessed the same accordinglyAppeals filed by the appellant before the Appellate Assistant Commissioner and theAppellate Tribunal failed with the result that the appellant. applied to the Tribunal to state a case inter alia in connection with this particular question and an application was made by him under section 66(1) of the IndianAct asking that the aforesaid question be referred to the High Court for its opinion. The Tribunal refused to refer that question and the appellant thereupon made an application to the High Court under section 66(2) of the Act requesting the High Court to direct the Tribunal to state a case and refer the said question amongst others for its decision. The High Court as stated above declined to do so, and hence this appeal

Reasoning: 5. We are at present not concerned to express any opinion on the merits of this contention. Suffice it to say that this contention raises a question of law which should have been referred to the High Court by theAppellate Tribunal for its decision, and when on the refusal of theAppellate Tribunal to state a case and to refer the said question to the High Court the appellant approached the High Court, the High Court should, in the exercise of its jurisdiction under section 66(2) of theAct, have asked theAppellate Tribunal to state a case and refer the said question to it for its decision.