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TMI Blog1984 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... mily could not be withdrawn under section 155(5) of the Act ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was no violation of section 34(3)(a) ? " The assessee is a Hindu undivided family represented by its karta, Shri M. V. S. Sastry. The Hindu undivided family, consisting of the karta and his three major sons, was carrying on business of printing and was allowed development rebate on the machinery used in that business. There was a partition on March 31, 1974, and the joint family business was converted into a business of partnership consisting of Shri M. V. S. Sastry and his three sons as partners. Thus the business and the assets which originally belonged to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer as the partnership firm is not a legal entity and is only a convenient and compendious name given to a contractual relationship in which two or more persons combined their efforts and conjointly applied the same to commercial activity with a view to make profits. On the other hand, the contention of the Revenue before the Tribunal was that the Hindu undivided family and the partnership firm are two different entities and when the business and the assets belonging to the Hindu undivided family became the assets of the partnership, there is a transfer from one entity to another entity and the action of the Income-tax Officer in withdrawing the development rebate under section 155(5)(i) was justified, and reliance was placed by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 and subsequently at any time before the expiry of eight years from the end of the previous year in which the machinery was installed, the machinery is sold or otherwise transferred by the assessee to any person, or at any time before the expiry of the said eight years, the assessee utilises the amount credited to the reserve account under clause (a) of sub-section (3) of section 34 for distribution by way of dividends or profits or for any remittance outside India as profits or for any other purpose which is not purpose of the business of the undertaking, then the development rebate originally allowed shall be deemed to have been wrongly allowed and the Income-tax Officer may recompute the total income of the assessee for the relevant pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner also indicates that the withdrawal of the development rebate was not based on section 34(3)(a) read with section 155(5)(ii). It is only at the stage of the appeal before the Tribunal, it was contended that there was a violation of section 155(5)(ii) in that there has been a distribution of the reserve amount to the female members of the Hindu undivided family at the time of the partition. The Tribunal has specifically found that in view of the recitals in the partition deed, there is no basis for the contention of the Revenue that a portion of the amount credited to the reserve account under section 34(3)(a) was distributed to the female members of the family at the time of the partition. In view of the factual posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference between the market value of the lorries and the written down value is chargeable to tax under section 41(2). The Tribunal held that by the transfer of the lorries to the partnership, the ownership was transferred from the joint family to a different entity and hence section 41(2) was attracted. Reversing the decision of the Tribunal, the High Court held that there was no transfer when the partnership firm took over the lorries from the joint family and that the true legal position is that when a business carried on by Hindu undivided family after partition was converted into a partnership business, there was no transfer involved either for purposes of section 41(2) or of section 45. In Addl. CIT v. Dalmia Magnesite Corporation [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the earlier decisions both of this court and of the Supreme Court, held that three conditions must be satisfied for the withdrawal of the development rebate under sections 34(3)(b) and 155(5), namely, (1) the machinery or plant must have been sold or otherwise transferred; (2) that such a sale or transfer must be by the assessee ; and (3) that the Sale must be before the expiry of eight years from the end of the previous year in which it was acquired or installed. In that case, it was held that though there was a transfer of the machinery, the transfer was not by the assessee but by some other person to whom the assets had been allotted. Thus, even assuming that after the partition of the joint family assets among its coparceners, they ..... X X X X Extracts X X X X X X X X Extracts X X X X
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