Uniform development rebate conditions and asset transfer for consideration fell within the rebate-withdrawal provision.

Section 10(2)(vib) of the Income-tax Act, 1922 was held not to offend Article 14 because the development rebate condition applied uniformly and any adverse consequence depended on the assessee's own choice to transfer the asset during the prohibited period. The transfer of buses by a company to a partnership firm for consideration was treated as a sale or otherwise transfer within the provision. The section was concerned with the fact of sale or transfer, not with whether the transaction produced profit or was a commercial venture in the narrower sense. The statutory challenge therefore failed and the transfer attracted withdrawal of the rebate.

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Issues: (i) Whether section 10(2)(vib) of the Income-tax Act, 1922 was violative of article 14 of the Constitution of India; (ii) Whether the transfer of buses by the company to the partnership firm amounted to a sale or otherwise transfer within section 10(2)(vib).

Issue (i): Whether section 10(2)(vib) of the Income-tax Act, 1922 was violative of article 14 of the Constitution of India.

Analysis: The statutory condition attached to development rebate applied uniformly to every assessee. The difference in consequence arose only from the assessee's own choice whether to transfer the asset to the Government or to any other person within the prohibited period. The classification was thus not arbitrary or discriminatory.

Conclusion: The provision was not violative of article 14 and the challenge failed.

Issue (ii): Whether the transfer of buses by the company to the partnership firm amounted to a sale or otherwise transfer within section 10(2)(vib).

Analysis: The resolution showed a transfer for consideration of the buses by the company to the partnership firm. The transaction was a sale in the ordinary legal sense, and the section was concerned with whether the asset had been sold or otherwise transferred, not with whether the transfer yielded profit to the assessee or was entered into as a commercial venture in the narrower sense.

Conclusion: The transaction amounted to a sale or otherwise transfer within section 10(2)(vib).

Final Conclusion: The statutory challenge failed, the impugned transfer fell within the mischief of the development rebate provision, and the appeal was dismissed.

Ratio Decidendi: A uniform tax rebate condition that turns on the assessee's own election does not offend article 14, and a transfer for consideration of the asset within the prohibited period is a sale or otherwise transfer for the purpose of withdrawing development rebate.

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