9911796707
TMI Blog1998 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 cannot be withdrawn by the Income-tax Officer?" The assessee at the material time, was a Hindu undivided family of which one Srinivasa Iyer was the karta and his son, the respondent, was a coparcener. The joint family carried on business. For the assessment years 1960-61 to 1965-66, development rebate was allowed to the joint Hindu family on new machinery and plant installed by the joint Hindu family for the purpose of its business. On August 1, 1967, there was a partial partition of the joint family and the plant and machinery which had been the subject-matter of development rebate was allotted to the two coparceners at the written down value. After the partition, the two members sold the machinery and plant allotted to them respectively to a third party on October 1, 1967. On coming to know of the sale within a period of eight years from the installation of the said plant and machinery, the Income-tax Officer by his letter dated February 6, 1971, proposed to withdraw the development rebate granted to the assessee on the ground that the machinery had been sold within the statutory period. It was contended on behalf of the assessee that the person to whom the development reba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly : . . ." (underlining ours) Section 155(5) which deals with withdrawal of development rebate provides as follows : "155. (5) Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship, machinery or plant installed after the 31st day of December, 1957, in any assessment year under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), and subsequently--- (i) at any time before the expiry of eight years from the end of the previous year in which the ship was acquired or the machinery or plant was installed, the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or in connection with any amalgamation or succession referred to in sub-section (3) or sub-section (4) of section 33; or (ii) at any time before the expiry of the eight years referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery to a third party. Section 155(5)(i) requires that : (1) the plant or machinery should be sold or otherwise transferred; (2) the transfer should be by the assessee to any person. Here on a partial partition of the joint Hindu family, portions of plant and machinery have come to the share of two coparceners. We have to examine first, whether this amounts to a transfer of plant and machinery by the joint Hindu family to the individual coparceners. The term "transfer" is defined under section 2(47) of the Income-tax Act, 1961, in a wide manner so as to include not merely a sale or exchange, but also extinguishment of any right in the capital assets (vide capital gains). Whether in the present case the partial partition results in the extinguishment of any right of the assessee joint Hindu family in the assets of the joint Hindu family, or amounts to a transfer of its assets to the individual coparcener, requires to be considered. A similar question came up before this court and was considered by a Bench of three judges in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49. In that case the development rebate had been granted to the partnership firm which was dissolved within a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of section 2(47) of the Act". The same reasoning would apply to partition of a Hindu joint family. In Principles of Hindu Law, Mulla, at page 262 (16th edition), has compared a partnership firm and a joint Hindu family firm and set out points of distinction between the two. The main distinction is that in a joint family business no member of the family can say that he is the owner of any specific share. The essence of the joint Hindu family property is unity of ownership and community of interest. Shares of the members are not defined. However, in view of the unity of ownership and community of interest of all coparceners in the joint Hindu family business, the position on partition of the joint Hindu family business, whether it be partial or comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Madras High Court has, therefore, held that the reopening by the Income-tax Officer under section 155(5) of the Income-tax Act, 1961, was not in accordance with law. The appellant, however, has drawn our attention to two recent decisions of this court where a somewhat different view has been taken of the provisions relating to development rebate. In the case of South India Steel Rolling Mills v. CIT [1997] 224 ITR 654, a Bench of two judges of this court examined the case where the partnership firm had obtained the benefit of development rebate under section 33(1)(a) but the partnership firm stood dissolved before the expiry of eight years on account of the death of one of the two partners, although from the next day a new partnership firm was constituted. This court said that under section 33(1)(a), the words which qualify an assessee for obtaining development rebate are, (plant and machinery) "which is owned by the assessee and is wholly used for the purposes of the business carried on by him". Therefore, the machinery must be used for a period of eight years by the assessee for the purposes of the business carried on by him. Since the assessee had ceased to carry on busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
