TMI Blog1975 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... e year 1965-66 was rightly withdrawn under section 155(5)(i) of the Income-tax Act, 1961 ? " The facts leading to the above reference are as follows : The assessee is a firm carrying on business at Arsikere. During the assessment year 1965-66, it was carrying on business as mundy merchants and it also owned a cinema theatre, a rotary oil mill and a coir factory. Development rebate had been claimed by the assessee during the assessment year 1965-66, in respect of plant and machinery used in the oil mills and coir factory under section 33 of the Act, and the same had been allowed by the assessing authority. The firm consisted of 7 partners. 2 minors had also been admitted to the benefit of the partnership. On March 31, 1965, the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which development rebate had been allowed, had been transferred by the assessee within the stipulated time. After hearing the parties, he made an order rectifying the order of assessment by withdrawing the rebate and called upon the assessee to pay the deficient tax due and payable. The appeal filed by the assessee before the Appellate Assistant Commissioner of Income-tax and the further appeal filed before the Tribunal were dismissed. Hence, this reference. Section 34(3)(b) of the the Act provides : " If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership capital and there was no transfer of assets in the eye of law. It is not disputed that the machinery and plant in question formed part of the assets of the firm of seven partners. The nature of the rights of the partners of a firm in the assets belonging to the firm under the Partnership Act, has been explained by the Supreme Court in Addanki Narayanappa v. Bhaskara Krishnappa : " It seems to us that looking to the scheme of the Indian Act no other view can reasonably be taken. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the exclusive property of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the partners acting on behalf of the firm conveying or transferring their interest to such individual partners. In that event, it is clear that there is an extinguishment of the rights of the firm in the assets in question on the one hand and acquisition of interest in them by such individual partners. In law, such a transaction does amount to a transfer. The expression " transfer of property " has been defined in section 5 of the Transfer of Property Act. It means, an act by which a living person conveys property, in the present or in future to one or more other living persons, or to himself, and one or more other living persons. In the instant case, all the partners of the firm who were entitled to transfer the machinery and plant on b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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