COMMISSIONER OF INCOME-TAX, TAMIL NADU versus S. BALASUBRAMANIAN

Citation: [1998] 2 S.C.R. 415 · Decided: 24-03-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

COMMISSIONER OF INCOME-TAX, TAMIL NADU 
A 
v. 
S. BALASUBRAMANIAN 
MARCH 24, 1998 
[SUJATA V. MANOHAR AND D.P. WADHWA, JJ.] 
B 
Income-Tax Act, 1961--Sections 33, 34 and 155(5)-Development 
Rebate-Withdrawal of-Business carried on by Assessee, a Hindu Undivided 
Family-Development Rebate allowed to assessee on new machinery and 
plant-Partial Partition of Joint Family properties-New Machinery and C 
Plant, allotted to two coparceners at written down value-Sold by them 
within eight years of purchase-Held, Development Rebate allowed earlier 
rightly withdrawn. 
Section 2(47)-Hindu Undivided Family-Partial Partition-Share D 
allotted to coparcener-Does not amount to transfer. 
Assessee, a Hindu Undivided Family, carried on business. For 
assessment years 1960-61 to 1965-66 development rebate was allowed to the 
assessee on new machinery and plant. On a partial partition of joint family 
properties, plant and machinery were allotted to two coparceners at written E 
down value. Within eight years of purchase the same was sold by them to 
a third party. The Development Rebate allowed earlier was withdrawn by the 
lncoine Tax Officer. In Appeal, the Tribunal held that the withdrawal of 
Development Rebate by the Income Tax Officer was wrong. The Tribunal's 
decision was upheld by the High Court. 
F 
In appeal before this court it was contended by the Revenue that under 
Section 33(l)(a) the assessee had before the expiry of eight"years, ceased to 
carry on the business. The plant and machinery purchased was sold by them 
before the expiry of eight years, whereby they ceased to comply with Section 
33(1 )(a) and also the requirement of Section 34(3)(a) and lost its right to 
development rebate which was granted earlier. 
G 
Allowing the appeal, this Court 
HELD: I. In the instant case the assessee has not used the machinery 
• 
for its business for a period of eight years even if one takes the assessee 
as a compendium of joint Hindu family-cum-coparceners. Sections 33, 34 H 
415 
416 
SUPREME COURT REPORTS 
(1998] 2 S.C.R. 
A and 155(5) of the Income-Tax Act have to be read together. Development 
Rebate can be granted when the new machinery is wholly used by the 
assessee for the purpose of his business for a period of eight years and it 
should not be sold or otherwise transferred by the assessee. 1423-G-HJ 
2. On partition, the shares of the coparceners in the joint family 
B business become defined and their community of interests is separated. The 
property which so comes to the share of the coparcener, therefore, cannot 
be considered as transfer by joint family to a coparcener or the extinguishment 
of the right of the joint family in the property, the joint family not having 
its own separate interest in that property which can be transferred.1421-GI 
c 
D 
E 
F 
Malabar Fisheries Co. v. Commissioner of Income-Tax, Kera/a, 120 
ITR 49, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4048-53 
of 1984. 
From the Judgment and Order dated 2 I. 7 .81 of the Madras High Court 
in T.C. Nos. 38-43of1977. 
T.L.V. Iyer, Arun K. Sharma, C. Radha Krishna and B.K. Prasad for the 
Appellant. 
S. Ganesh, T. Ravi Kumar, Pratap Venugopal, Ms. Manju Mishra and 
K.J. John for the Respondent. 
The Judgment of the Court was delivered by 
MRS. SUJATA V. MANOHAR, J. The following question was referred 
to the High Court of Madras under Section 256(1) of the Income-tax Act, 1961: 
"Whether on the facts and in the circumstances of the case, the 
Appellate Tribunal was right in holding that the provisions of Section 
155(5) of the Income-tax Act, 1961 are not applicable to the facts of 
G 
the casP- and that the Developments rebate allowed for assessment 
years 1960-61 to 1965-66 cannot be withdrawn by the Income-tax 
Officer?" 
The assessee at the material time, was a Hindu undivided family of 
which one Srinivasa Iyer was the Karta and his son, the respondent, was a 
H coparcener. The joint family carried on business. For the assessment years 
i 
C.J.T. v. S. BALASUBRAMANIAN [SUJATA V. MANOHAR, J.] 
417 
1960-61to1965-66 development rebate was allowed to the joint Hindu family A 
on new machinery and plant installed by joint Hindu family for the purpose 
its business. On 1.8.1967, there were a partial partition of the joint family and 
the plant and machinery which had been the subject matter of development 
rebate was allotted to the two coparceners at written down value. After the 
partition, the two members sold the machi

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