Where the assessee transferred its undertaking under a scheme of demerger which provided that neither the assessee nor its shareholders would receive any consideration from the transferee company as the value of the liabilities taken over were more than the value of the assets taken over and the assessee treated the difference between the said liabilities and assets as a capital reserve and the question arose whether such difference was assessable to tax, Held:

Of the two formulas available, the formula adopted by the assessee, i.e. of taking the difference between the indexed book value on the date of conversion and the sale proceeds as long-term capital gains, being beneficial to the assessee, should be adopted. No part of the gains can be assessed as business income.

Where the AO had granted deduction under sections 80HH & 80-I in the year of formation of the new industrial undertaking, he could not, in a subsequent year, deny the deduction on the ground that the conditions are not fulfilled, if he has not withdrawn the deduction granted in the earlier year.

Where the assessee had earned freight income by transporting cargo in international traffic through ‘slot charter’ arrangements on ships owned by other enterprises and the question arose whether such profits arose from “operation of ships”, held: that in view of the OECD Commentary, Article 9 of the India-UK DTAA must be interpreted as applying not only to income arising directly from the operation of ships but also to income arising from ancillary operations such as transportation of cargo through ships owned by other enterprises.