TaxTMI 
TaxTMI 
1970 (12) TMI 16
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....4(3)(b) of the Income-tax Act, 1961 ? 2. Whether, in view of the provisions of section 10(2)(vic)(ii) of the Indian Income-tax Act, 1922/section 33(4) of the Income-tax Act, 1961, on the admitted facts and in the circumstances of the case, one-half of the development rebate in respect of machinery and plant which fell to the share of the two partners, A.R. Khosla and Adarsh Bala Khanna, was rightly withdrawn by the Income-tax Officer in respect of the assessment years 1959-60 to 1963-64 ? 3. Whether, in respect of the assessment year 1964-65 when the factory worked for the whole year, the Income-tax Officer was legally entitled to disallow development rebate for the year in question on the basis of subsequent events which took place a....
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...., formed a new partnership firm under the name and style of Ram Kay Engineering Co., under a deed dated April 1, 1964, and carried on the business of manufacture and sale of electrical accessories, as was being done by the previous firm. This new firm, however, lasted only for six days and on April 7, 1964, all the assets of the firm, Ram Kay Engineering Co., were taken over by a private company, named, Ram Kay Engineering Co. P. Ltd., which was constituted by Anant Ram Khosla and his daughter, Smt. Adarsh Bala Khanna, the only two shareholders. They were also the partners of Ram Kay Engineering Co. Shanti Swarup Khosla also constituted a private limited company with effect from April 22, 1964, and the assets taken over by him on dissolutio....
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....ult was that for all the five years, the development rebate already allowed to the assessee was withdrawn by passing modified orders of assessment under section 155 of the 1961 Act. The assessee, Messrs. Kay Engineering Co., then filed six reference applications before the Tribunal which arose out of the consolidated order of the Tribunal and all those applications were decided by one order and the questions of law set out above in the beginning of this judgment have been referred to this court for opinion. The first question that arises for determination is whether the division of the assets amongst the partners of the firm, Messrs. Kay Engineering Co., on dissolution, amounted to transfer of those assets to the partners. In our opin....
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....g the partners or their representatives according to their rights. Section 48 of the Partnership Act provides for the mode of settlement of ccounts between the partners. It prescribes the sequence in which the various outgoings are to be applied and the residue remaining is to be divided between the partners. The distribution of surplus is for the purpose of adjustment of the rights of the partners in the assets of the partnership; it does not amount to transfer of assets. On the dissolution of the partnership, each theatre must be deemed to be returned to the original owner, in satisfaction partially or wholly of his claim to a share in the residue of the assets after discharging the debts and other obligations. But, thereby the theatre....
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....d already been allowed during the five assessment years. There is no merit in this submission. The firm, Ram Kay Engineering Co., was immediately succeeded by the private company and all its assets and liabilities were taken over by it and all the shareholders of the private company were the partners of the previous firm, and, therefore, all the ingredients specified in section 33(4) and Explanation (ii) thereto are satisfied in the present case. The private company cannot be said to have succeeded to M/s. Kay Engineering Co., Kapurthala, which was dissolved on March 31,1964, but it succeeded to Ram Kay Engineering Co., which had come into being on April 1, 1964, and continued up to April 6, 1964. It is the assets and liabilities of this fi....