1981 (10) TMI 68 - AT - Income Tax

Summary

Issues:
1. Delay in filing the appeal.
2. Entitlement to depreciation and development rebate on machinery installed prior to firm dissolution.

Analysis:
1. The appeal was filed late by 7 days, but the delay was condoned due to a reasonable cause, and the appeal was admitted for consideration on merits.

2. The main issue was whether the assessee firm is entitled to depreciation and development rebate on machinery installed before the firm's dissolution. The firm, M/s. Ralson Industries, was dissolved on 30th June 1974, with a deed stating that the business would be carried on by a private limited company, M/s. Ralson Cycles Pvt. Ltd. The firm filed a return for the assessment year 1975-76, and the Income Tax Officer (ITO) completed the assessment, initially not allowing depreciation and development rebate. Later, an order of amendment was made granting registration and allowing the deductions. However, the ITO later rejected the application for depreciation and development rebate, stating that as the assets were transferred to the company on the last day of the previous year, the firm was not entitled to these deductions.

3. The CIT (Appeals) upheld the ITO's decision, leading to the appeal before the ITAT. The assessee argued that the case was similar to a previous Tribunal decision and relied on the Supreme Court judgment in the case of Malabar Fisheries Co. The revenue contended that the assets no longer belonged to the firm as they were transferred to the company. The revenue also argued that the judgment cited by the assessee was not relevant to the current case.

4. The ITAT analyzed the facts and found that there was no transfer involved as the private limited company continued the business with all its rights and responsibilities. Referring to the Supreme Court judgment in the Malabar Fisheries case, the ITAT concluded that since there was no transfer and the firm had complied with the law, depreciation and development rebate should not have been refused. The ITAT rejected the revenue's argument of an arranged transfer and directed that depreciation and development rebate be allowed to the assessee firm.

5. In conclusion, the appeal was allowed in favor of the assessee, with the ITAT ruling that depreciation and development rebate should be allowed, as there was no transfer involved and the firm had fulfilled the legal requirements.