TMI Blog1991 (3) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... o the partnership and, in that view, holding that the development rebate on plant and machinery of the proprietary business transferred to the partnership within eight years was wrongly allowed within the meaning of clause (b) of sub-section (3) of section 34 of the Income-tax Act, 1961, which could be withdrawn under section 155(5) of the Income-tax Act, 1961 ? " The assessee is an individual. During the accounting year relevant to the assessment years 1965-66, 1969-70, 1970-71 and 1971-72, he was carrying on the business of printing and publication as proprietary business up to May 31, 1972. On the plant and machinery employed in the said business, he claimed development rebate during the said year which was granted to him. The said pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired or installed, any allowance made Under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly." Sub-section (5) of section 155 provides precisely for such a situation. Sub-section (5) reads as under: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year in which the sale or transfer took place or the money was utilised. " The question that arises for our consideration is where a person places his personal individual assets in a partnership of which he is partner, whether it amounts to a transfer of those assets within the meaning of section 34(3)(b). This very question had arisen before the Karnataka High Court in Addl. CIT v. M. A. J. Vasanaik [1979] 116 ITR 110. It was held that, on the conversion of the property of an individual into property of a firm of which he is a partner, there is a transfer of interest of the individual to the partnership and section 34(3)(b) of the Act is attracted, where the development rebate had been allowed in respect of the assets which pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that very court has taken a contrary view in CIT v. Suresh Chandra Jain [1989] 178 ITR 241 (AP), mainly on the basis of the decision of the Supreme Court in Sunil Siddharthbhai's case [1985] 156 ITR 509. It explained that its earlier decision was rendered prior to the decision of the Supreme Court, but that in the light of the said decision, that view can no longer be taken. The subsequent decision of the Andhra Pradesh High Court in CIT v. Suresh Chandra Jain [1989] 178 ITR 241 elaborately considers the entire case law on the subject. We are in respectful agreement with the said view. Learned counsel for the assessee, Sri Saran Behari Lal Srivastava, relied strongly upon the decision of the Supreme Court in Malabar Fisheries Co. v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute the partnership property, there is transfer of interest of the individual to the partnership and sections 34(3)(b) and 155(5) of the 1961 Act are attracted. In the first instance, that decision dealt with the converse case and it does not necessarily follow on a parity of reasoning that the distribution, division or allotment of partnership assets to the partners of a firm upon its dissolution would amount to a transfer of assets as was sought to be contended by counsel for the Revenue. Secondly, it is unnecessary for us to express any opinion on the correctness or otherwise of the view taken by the Karnataka High Court in that case." It is thus clear that not only the Supreme Court declined to express any opinion on the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions dealing with the head of capital gains, and therefore, this definition is relevant for the purposes of that head. The implications of this definition are dealt with post under sections 45 and 47 which deal with capital gains." We are unable to see how the above passage advances the case of the petitioner. Indubitably, the plant and machinery which was transferred by the assessee to the partnership do constitute capital assets. For the above reasons, the question referred is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. No order as to costs. Learned counsel for the assessee makes an oral request for certifying this case to be a fit one for appeal to the Supreme Court under section 261 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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