Definition of Transfer in Income Tax Act: Machinery Hiring Not Considered Transfer

The Court held that hiring machinery from a sister concern did not amount to a transfer under section 80J(4)(ii) of the Income Tax Act, 1961. The Tribunal's order denied relief under section 80J for the business of slate and timber, determining that hiring machinery did not meet the conditions for transfer. The Court emphasized the importance of the word "formed" over "transfer" in the section, ultimately concluding that in this case, hiring machinery did not constitute a transfer for the new undertaking.

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Issues involved: Interpretation of whether hiring certain machinery from a sister concern constitutes a transfer under section 80J(4)(ii) of the Income Tax Act, 1961.

Summary:
The Advocate-General argued that hiring machinery could be considered a transfer under section 80J(4)(ii) citing a Bombay High Court judgment, which was later disapproved by the Supreme Court. The Supreme Court emphasized the importance of the word "formed" over "transfer" in the section. The Tribunal's order discussed the denial of relief under section 80J for the business of slate and timber, where the CIT(A) held that hiring machinery did not fulfill the conditions for transfer under section 80J(4)(ii). The Tribunal concluded that hiring machinery did not constitute a transfer for the new undertaking.

The Advocate-General contended that the question referred to the Court was not properly framed based on the Supreme Court's decision in Bajaj Tempo Ltd. case. However, the Court decided to proceed with the case based on the facts and the lengthy pendency of the reference. The Court referenced various judgments but found them irrelevant to the present case. Ultimately, the Court held that hiring machinery from a sister concern did not amount to a transfer under section 80J(4)(ii) in the specific circumstances of this case.

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