Section 114 — the law in short
What the courts have decided on section 114, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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CIT v Electric Control Gear Mfg Co
Supreme CourtCuts both waysSuperseded by amendment
We sold our entire business to a company as a going concern for one lump sum — can the Assessing Officer bring the depreciation allowed earlier to tax under section 41(2)?
No, not on these facts. The Supreme Court held that where a firm transfers the entire assets of its business with liabilities as a going concern for a lump sum, and nothing indicates the price attributable to machinery, plant or building out of that consideration, section 41(2) cannot be applied. The fact that a given sum had been allowed as depreciation does not show that it is the excess of price over written down value. The Court affirmed the High Court on that question and on the assessee's status as a registered firm, but reversed it on the circulars question, which was answered for the Revenue. The appeal was partly allowed.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.