TMI Blog1987 (1) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1966-67 in the sum of Rs. 1,46,213. Accordingly, the Income-tax Officer computed the loss of the assessee for that assessment year at Rs. 53,562. For the following assessment year 1967-68, the Income-tax Officer computed the income of the assessee at Rs. 2,05,555 after setting off the loss of the previous assessment year. On October 28, 1972, the assessee entered into an agreement (annexure D) with Shaparia Dock Steel Co. P. Ltd., Bombay (" the transferee "). This agreement provided that the trawler was leased to the transferee for a sum of Rs. 50,000, subject to the transferee depositing with the assessee a sum of Rs. 1,00,000 by way of security. It was further agreed that at the end of ten months, the trawler would be sold to the transferee and the deposit amount would be adjusted towards the total sale consideration. In accordance with the agreement, the assessee took steps to obtain the approval of the concerned authority for the sale of the vessel in accordance with sections 42 and 43 of the Merchant Shipping Act, 1956. After obtaining such approval, the trawler was sold on March 29, 1974. The Income-tax Officer thereupon initiated proceedings under section 155 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh High Court in Ghanshyamdas Kishen Chander v. CIT [1980] 121 ITR 121. It is true, as Shri Nagendran points out, that the trawler could not be sold otherwise than in accordance with the provisions of the Merchant Shipping Act. Sections 42 and 43 being specific and mandatory, any transaction effected without the previous approval of the statutory authority would be null and void. It is not disputed that the approval of the concerned authority was not obtained until after the expiry of the, period of eight years. It cannot, therefore, be disputed that no sale of the trawler was effected within the period of eight years. In fact, the Tribunal, rightly in our view, held that that was the position. But the question really is not whether the trawler was sold, but whether the assessee had by reason of the transaction evidenced by annexure D forfeited its right to the development rebate. We shall now read the relevant provisions of the Income-tax Act in so far as they are material. Section 33 reads: " 33. Development rebate.-(1)(a) In respect of a new ship ...... which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essel, bat also when it is " otherwise transferred ". The expression " transfer " was considered by the Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185, in the context of section 12B of the Indian Income-tax Act, 1922 (the " 1922 Act"). The Supreme Court stated (p. 192): " Before section 12B can be attracted, title must pass to the company by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. It is true that the word 'transfer' is used in addition to the word 'sale' but even so, in the context, transfer must mean effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of the immovable property." (emphasis supplied) The Supreme Court emphasised the fact that, in the context of section 12B relating to capital gains, " transfer " did not imply anything less than effective conveyance of the capital asset to the transferee. Mere transfer of the physical possession pursuant to an agreement to sell the property would not be conveyance of the right, title and interest of the owner so as to attract capital gains. It is significant that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as restricted. As stated by the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610; 17 FJR 423 (SC): " 10. ......Where we are dealing with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation." According to Shri Nagendran, a transfer which does not result in the total extinction of the rights of the transferor by reason of sale, exchange, relinquishment, etc., but retains with him a right of reversion, as in the case of lease, is not a " transfer " which attracts the cancellation of development rebate. This argument is sought to be supported by reference to the aforesaid decision of the Andhra Pradesh High Court. It is true that the Andhra Pradesh High Court, unlike the Supreme Court, dealt with section 45 of the present Act which defines " transfer ". Nevertheless, since that court was concerned with the question of capital gains which, as stated by the Supreme Court in the context of section 12B of the 1922 Act, would not arise except upon completion of effective conveyance and not by transfer of mere physical possession, it was perhaps unnecessary to emphasise, or it was perh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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