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TMI Blog1996 (2) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... minor sons and there minor daughters. The Income-tax Officer noticed that this family was allowed development rebate in the assessment year 1967-68 to the extent of Rs. 33,353 but it was carried forward and set off in 1972-73 assessment. With effect from 1973-74 assessment, the assessee formed a partnership firm by name Sri Ram Products. Since the assets of the family had been taken over by the new firm, the development rebate allowed earlier had to be withdrawn under section 155. Hence, the Income-tax Officer issued a notice, and there was no reply. The Income-tax Officer revised the assessment for the assessment year 1972-73 under section 155(5) by order dated February 21, 1995. On appeal before the Appellate Assistant Commissioner, the assessee contended that the Income-tax Officer failed to consider the representation made by the authorised representative as well as the fact that there was no transfer. The Appellate Assistant Commissioner held that the assets were transferred from the Hindu undivided family to the firm and accordingly he upheld the order of the Income-tax Officer. Aggrieved, the assessee filed appeal before the Tribunal. According to the Tribunal, the family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m are two different entities. It was submitted that the word otherwise transferred should be given the widest meaning so as to take note of all kinds of transfer of ownership in whatever kind it may be. Learned standing counsel further submitted that, that the Tribunal was not correct in holding that when the Hindu undivided family assets were taken over by the partnership firm, it is not transfer. According to learned standing counsel, the decisions relied on by the Tribunal are not applicable to the facts of this case. Learned standing counsel relied on the decision of this court in the case of Baldevji v. CIT [1985] 156 ITR 776 in order to support his contention. Learned standing counsel further submitted that according to the facts arising in the present case, the development rebate was granted after the partition in favour of the Hindu undivided family. Therefore, according to learned standing counsel, the Tribunal was not correct in holding that there is no transfer in this case. On the other hand, learned counsel for the assessee while supporting the order passed by the Tribunal submitted that even in the case of "otherwise transfer" there must be delivery of possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transfer occurred while the assets of the Hindu undivided family were taken over by the partnership firm ?" In the case of Sunil Siddharthbhai v. CIT [1985] 156 ITR 509, the Supreme Court while considering the provisions of section 45 of the Income-tax Act, 1961, held that : " Where a partner of a firm makes over capital assets which are held by him to a firm as his contribution towards capital, there is a transfer of a capital asset within the terms of section 45 of the Income-tax Act, 1961, because an exclusive interest of the partner in personal assets is reduced, on their entry in to the firm, into a share interest. " In the case of Baldevji v. CIT [1985] 156 ITR 776 (Mad), while considering the provisions of section 33 and section 155(5), this court held as under : " The normal position of a firm under the scheme of the Income-tax Act, 1961, is that it is an entity assessable on its own. It is an entity distinct even from its partners. Apart from the various charging and machinery provisions of the Act, which regard a firm as possessing a taxable personality of its own, the definition of the expression 'person' occurring in section 2(31)(iv) of the Income-tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm. But the process of bringing separate properties of the partners into the joint stock of partnership assets itself involves a change of ownership. Hence, where a sole proprietary concern is converted into a partnership and the machinery which was the property of the sole proprietor becomes the property of the firm, there is a 'transfer' of ownership of the machinery and if development rebate had been granted in respect of such machinery, it is liable to be withdrawn under the provisions of section 155(5) of the Income-tax Act, 1961. " The above decision rendered by this court was followed by the Andhra Pradesh High Court in the case of CIT v. Suresh Chandra Jain [1989] 178 ITR 241, wherein it was held as under : " We may refer to a more recent judgment of the Madras High Court in Baldevji v. CIT [1985] 156 ITR 776. This was also a case where on the individual transferring the assets in respect of which development rebate was originally granted, the Revenue withdrew the rebate acting under section 155(5) of the Act. The correctness of the Revenue's action was questioned. The Madras High Court referred to Batcha Sahib's case [1969] 72 ITR 528 and referred to the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery which has obtained a grant of development rebate by reason of its having come under the ownership of the assessee should continue to remain in the same ownership of the assessee and should not be parted with by him for a period of at least eight years from the date of installation. The High Court held that : 'It stands to reason, therefore, that the expression "otherwise transferred" must be given such wide amplitude of meaning as is consistent with its ordinary connotation. There can be no warrant for cutting down that meaning to any extent'. " The same view was also taken by the Allahabad High Court in the case of Tarun Bhai v. CIT [1992] 193 ITR 543. In this decision, the Allahabad High Court followed the decision of the Andhra Pradesh High Court in CIT v. Suresh Chandra Jain [1989] 178 ITR 241. In the case of S. M. Chemicals and Electronics P. Ltd. v. CIT [1995] 215 ITR 943, the Bombay High Court while considering the provisions of sections 32A(5), 34(3)(b), 155(4A) and 155(5) of the Income-tax Act, 1961, held that on a reading of the provisions of sections 32A(5), 34(3)(b), 155(4A) and 155(5) of the Income-tax Act, 1961, the intention of the Legislature is to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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