LexCOMMISSIONER OF INCOME-TAX, MADHYA PRADESH versus DEWAS CINE CORPORATION
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A
COMMISSIONER OF INCOME-TAX, MADHYA PRADESH
B
c
D
E
F
G
H
v.
DEWAS CINE CORPORATION
November 8, 1967
{J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.}
lnclian lncorne-tax Act, 19221 s. 10(2) (vii) 2nd proviso-Tl•'o persons
entering into partnership, each contributing a cinema theatre-on. dissolu-
tion of ."artnership theatres returned to respectii-·e owners at original price
-Depreciation equally dil'ided between
partners-Return of
theatres
u1hether sale for purpose oj s. 10(2) (vii), 2nd proviso.
S and H formed a partnership to carry on business in partnership_ as
exhibitors of cinematograph films with effect from March 1, 1947. Each
partner who was an owner of a cinematograph theatre
brought bis
theatre into the books of the partnership as an asset of the partnership.
For the assessment years 1950'51 to 1952-53 the Income-tax Officer
allowed depreciation aggregating to Rs. 44,380/- in respect of the two
theatres.
The partnership was dissolved on Sept·omber 30, 1951, and on
dissolutio•n it was agreed betweeri the partners that the theatres should
be returned to their original o\vners.
Jn the books of account main·
tained by the partnership, the assets
were shown as
taken over on·
October 1, 1951, at the original price less the depreciation allowed-
the
lk~preciation being equally divided between the two partners.
In
proceedings for assessment for the year 1952-53 the- respondent
was
treated as a registered firm.
The Appellate Tribunal held that bv res-
toring the two theatres to the two original owners "there was a transfer
by the firm and the
1~ntries adjusting the depreciation and writing off
the assets at the original value amounted to total
recoupment of the
entire depreciation by the partnership, and on that a¢count" proviso 2
to s. 10(2) (vii) of the Income-tax Act. 1922. applied.
The High Court.
in reference, held in favour of the assessee.
The Revenue appealed,
contending. that on
th~ transfer of the theatres from the partnership
to the original owners there was a sale.
HELD : The expr·~ssions "!iiide" and ''sold" are not defined in the
J,ncome-tax Act : Those expressions ar·:! used in s. 10(2) (vii) in their
ordinary meaning.
''Sale" according to its ordinary meaning is a transfer
of property for a price. and adjustment of the rights of the partners ln
a dissolved firm is not a transfer. nor is it for a price. [l 76A-B]
A partner may, it is true, in an action for dissolution insist that th·~
assets of the partnership be realised by sale of its assets, but \Vhere in
satis(ac:tion of the claim of the partner to his share in the value of the
residUe det-ermined on the footing of an actual or notional sale property
is allotted, the pro)J'orty so allotted to him cannot be deemed in Jaw to he
sold to him. fl 76El
Addanki Naravanappa and Anr. \r. Bhaskara Krislinappa
and Ors.
[1966] 3 S.C.R. 400, referred to.
C!V!L APPELLATE JURISDICTION : Civil Appeal No. 2163 of
1966.
Appeal from the judgment and order date<l April 15, 1964
of the Madhya Pradesh High Court in Misc. Civil Case No. 22
of 1963.
174
SUPREME COURT REPORTS
(1968] 2 S.C.R.
Niren De, Solicitor-Genera/, S. K. Aiyar, R. N. Sachthey and
S. P. Nayar, for the appellant.
Naunit Lal and B. P. Singh,· for the respondent.
The Judgment of the Court was delivered by
Shah, J.
S. G. Sanghi and Hari Prasad entered into an agree-
ment to carry on business in partnership as exhibitors of cinema-
tograph films in the name and style of "Dewas Cine Corporation"
with effect from March I, 1947. Each partner who was an owner
of a cinematograph theatre brought his theatre into the books
of the partnership as an asset 1f the partnership. For the assess-
ment years 1950-51 to I 952-53 the Income-tax Officer allowed
depreciation aggregating to Rs. 44,380/- in respect of the two
theatres.
The partnership was dissolved on September 30, 195 l,
and on dissolution it was agreed between the partners, that the
theatres should be returned to their original owners.
In the
books of account maintained by the partnership, the assets were
shov.n as taken over on October 1, 1951 at the original price
less the depreciation
allowed-the depreciation
being equally
divided between the two partners.
Jn proceedings for assessment for the year 1952-53 the res-
pondent was treated as a registered firm. The Appellate 1'ribunal
held that by restoring the two theatres to the two original owners
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