1994 (9) TMI 25

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..... ten down value taken by the Income-tax Officer in the assessment order passed for the assessment year 1976-77 ? " Tax Case No. 322 of 1981 : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the market value of the assets, viz., Rs. 5,59,730, should be taken into account to allow depreciation instead of the book value, viz., Rs. 2,79,871, adopted by the Income-tax Officer ? " The questions relate to the assessment years 1975-76 and 1976-77 and for that purpose, two references have been made. The facts necessary for the decision of the questions are that the assessee was a registered partnership-firm consisting of four partners. One M. K. A. Muthusami Nadar was a p .....

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..... ers after the death of their father, which necessitated the dissolution of the partnership and distribution of the assets, The Tribunal was, therefore, of the view that the transfer of assets was not for the purpose of reducing the liability to income-tax. In this view of the matter, the decision of the Appellate Assistant Commissioner was affirmed. The Department thereafter asked for a reference, which has been granted and the matter is before this court. Explanation 3 to section 43(1) of the Act would be attracted only in cases where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business and the Income-tax Officer is satisfied that the main purpose of the tr .....

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..... satisfaction. Under the circumstances, it was open to the appellate authorities to consider the matter to ascertain whether Explanation 3 to section 43(1) was attracted. Considering the facts and circumstances of the case, the Department could not hope to satisfy the appellate authorities that the transfer was for reducing the tax liability. The facts, as they are, could not lead to the said conclusion. Under the circumstances, Explanation 3 to section 43(1) was clearly not attracted. There is, therefore, no illegality in the finding of the Tribunal. In view of the discussion aforesaid, the questions are answered in the affirmative and against the Department. No costs. Counsel's fee Rs. 1,000 (one set). - - TaxTMI - TMITax - I .....

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