1985 (10) TMI 14

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....nce conversion, the business has been carried on in the name and style of Billimoria Electricity Supply Company. He became one of the partners of that firm having 20 paise share in a rupee in the profit and loss thereof. In the assessment year 1972-73, the Income-tax Officer learned about the conversion of the proprietary business into a partnership one, whereupon he invoked section 34(3)(b) of the Income-tax Act, 1961 (hereinafter called "the Act"), which provides as under : "(b) 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 under section 33 or under the....

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....velopment rebate allowed earlier in view of section 34 (3) (b) read with section 155(5) of the Act. The assessee, feeling aggrieved against the said order, appealed to the Appellate Assistant Commissioner who held that the conversion of the proprietary business into partnership business did not involve a transfer of the plant and machinery in question. He, therefore, allowed the appeal and set aside the order of the Income-tax Officer against which the Revenue preferred an appeal to the Tribunal. The Tribunal dismissed the appeal of the Revenue relying on its earlier decisions in Poonamchand F Shah v. ITO and Abdulrahim Umarbhai Maniar v. ITO, dated January 31, 1975 in I.T.As Nos. 905 and 906/Ahd/1975-76 and 668 and 669/Ahd/69-70 respective....

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....urt affirmed it in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509. In the context of the expression "otherwise transferred" used in clause (b) of sub-section (3) of section 34 as well as sub-section (5) of section 155 of the Act, the Kerala High Court in Abdul Rahim (A.), Travancore Confectionary Works v. CIT [1977] 110 ITR 595, held that when the business in the manufacture and sale of confectionery owned by the assessee was converted into a partnership business of the assessee and his son and the firm took over the assets and liabilities of the said business, there was an extinguishment of the right of the assessee in the property which was exclusively his and it was brought in for the purpose of the business of the firm and amounted to....