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TMI Blog1992 (11) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... re taken up and finalised by the Department. The Income-tax Officer proceeded against his widow, Malatibai, in the capacity of the deceased's legal heir under the provisions of section 155 of the Act. The said Karajgar died on July 18, 1968, i.e., in the previous year relevant for the assessment year 1969-70. He died intestate, and, upon his death, the ownership of the business carried on by him devolved on his legal heirs under the provisions of the Hindu Succession Act, 1956, who were the widow, Malatibai, his married daughter, Mrs. C.A. Somawanshi, and his three minor sons, all five of them shared the H deceased's property, including the business, equally. On August 17, 1968, Malatibai and Mrs. Somawanshi entered into a partnership to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery was to be withdrawn by virtue of section 155(5) of the Income-tax Act, 1961. Though, strictly, the Income-tax Officer ought to have first allowed the development rebate in the pending assessment and then withdrawn it by exercising his powers under section 155(5) read with section 154, since the assessments for the assessment years 1967-68 and 1969-70 were still not made, the Income-tax Officer just disallowed the claim for development rebate in these two years for the aforesaid reason. Being aggrieved, the assessee appealed, and, in appeal, the Appellate Assistant Commissioner upheld the view of the Income-tax Officer. The Tribunal took the view that, upon the death of a person, though his legal personality dies and becomes desti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te under section 33 of the Act ? " There are two issues which need to be considered for the purpose of answering the question referred for the opinion of this court. The first, is there a transfer within the meaning of section 2(47) of the Income-tax Act, 1961, when a person dies and his business assets devolve upon his legal heirs ? Second, is there a transfer where some of the legal heirs who have inherited property commonly from a deceased ancestor, constitute partnership-firm and bring in their respective shares as capital of the newly constituted partnership-firm ? The first question is easily answered, in view of the Supreme Court judgment in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509. Though the question was considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1300 and CIT v. B. C Srinivasa Setty [1981] 128 ITR 294. In the light of the ratio of Sunil's judgment [1985] 156 ITR 509 (SC), it would appear to us that the exclusive rights of the two partners to partnership having been reduced to a shared right, albeit between themselves, and the test laid down by the Supreme Court in the above case would equally apply to the situation of the assessee. The definition in section 2(47) of the Act of the expression " transfer " is wide enough to apply to the throwing of the individual shares of Malatibai and Mrs. Somawanshi into the capital of the partnership. Hence, there was transfer of the assets which had been used by the deceased Karajgar in his business, and in regard to which development rebate had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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