INCOME TAX ACT, 1961

Section 41(2)

Business income - Profit chargeable to tax under section 41(2) - Balancing charge - Assessee during process of being wound up sold assets forming part of block of assets

Assessee company was in process of winding up and it sold assets and claimed losses, i.e., difference between written down value of assets and value appearing in books of account, as business loss under section 41(2). Held: Tribunal held that section 41(2) is applicable only where sale value along with scrap value exceeds written down value. According to Tribunal since in instant case, sale value realized was less than written down value, section 41(2) would not apply. Even if sections 28 to 44DB talk only of taxability on excess received by assessee over written down value of assets, it cannot exclude or ignore minus figure or loss occurring on such sale transactions. Since certain assets of block of assets, not being immovable property of assessee, were sold during regular course of business, before it was wound up during relevant previous year, loss occurring on such sale at a figure less than written down value of assets should be treated as 'Business Loss' under section 41(2). Treatment of such losses as capital gains either as short-term capital gains or Long Term capital gains would depend upon the period for which assets are held by the assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2001-2002

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