LexMAHABIR COLD STORAGE versus COMMISSIONER OF INCOME TAX, PATNA
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MAHABIR COLD STORAGE v. COMMISSIONER OF INCOME TAX, PATNA DECEMBER 7, 1990 [KULDIP SINGH AND K. RAMASWAMY, JJ.] Income Tax Act, 1961-Section 31( 1)-Development rebate- Entitlement to unity of ownership and use of asset in business not to be disrupted. The appellant-assessee is a registered fll"DI. It started functioning w .e.f. May 3, 1956 at Purnea as the branch office of tbe partnership firm M/s Prayagchand and Hanumanmal Periwal with its Head Office at Calcutta. The fll"DI consisted of two partners Prayagchand Periwal and Hanumanmal Periwal. The partners had taken loan from Periwal & Co. Pvt. Ltd for erection of cold storage at Purnea and for its running capital. Later, Periwal & Co. was taken as a partner in the Purnea Branch for better management and financial assistance. The newly constituted partner- ship obtained separate registration under the Income Tax Act, 1922 as well as under the income Tax Act, 1961 and was separately assessed from the assessment year 1960-61. In the assessment year 1959-60 Prayagchand Hanumanmal instat. · led machinery of the value of Rs.5,80,055 in Sri Mahabir Cold Storage. For one reason or the other development rebate on the capital asset, namely, the machinery, was not claimed till the assessment year 1962- A B c D E 63 in which year the appellant claimed development rabate. The F Income-tax Officer, and on appeal the Assistant Appellate Commis- sioner, disallowed the claim on the fmding that the new fll"DI had neither inherited the claim as a transferee, nor did it amount to a succession. But on second appeal, the Tribunal held that the appellant firm was nothing more than the old frrm of M/s. Prayagchand Hanu- manmal with a change in the constitution, and tbe continuity of the G business remained in tact; hence the appellant was the owner of the plant and machinery installed in the assessment year 1959-60. The High Court answered the question referred to it in favour of the Revenue. The High Court held that the business at Purnea was carried on by the newly constituted partnership frrm which itself H 469 470 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R. J\ claimed to be a separate identity under the Income Tax Act, and had obtained separate registration. The High Court observed that in respect of the plant or machinery installed by the old partnership firm at Calcutta, the new firm at Purnea. a distinct and different assessable identity. could not claim development rabate either under the repealed Act or the 1961 Act. B Before this Court it was inter alia contended that (i) M/s. Prayagchand Hanumanmal consisting of original partners, bad taken M/s. Periwal and Co. merel~ for the purpose of better management and financial assistance; (ii) the old partnership had been continuing to have its identity as an assessable entity whose character had not been lost by C taking as new partber M/s Periwal and Co. (Pvt) Ltd. for the purpose of benefit of profits only, and hence the asessee was entitled to the develop- ment rebate under section 33 of the Income-Tax Act. On befalf of the Revenue it was contended that the appellant was not "the assessee", nor the owner of the machinery and plant; the D owner was M/s. Prayagchand Hanumanmal and as such the assessee was not entitled to the development rebate. Dismissing the appeal, this Court., HELD: (1) Under both the repealed Act as well as the 1961 Act E two conditions precedent were required to be fulf"dled for entitlement to development rebate, namely, the new machinery or plant installed must be ( 1) owned by the assessee and (2} used wholly for the purpose of tlte business carried on by hint. There must exist unity of ownership and use in the business. [475A, Fl F (2) Only the successor In interest of the business, in accordance with the provisions of the Act, so long as the twin requirements under section 33(1) are fulf"Illed, is entitled to the benefit. [475G] (3) When the unity of ownership and use of the asset in the busi- ness is disrnpted or a branch of an earlier business is taken over by a G new firm which exists sintultaneously with the other branches of the old business, the benefit of development rebate under Section 33(1) does not extend to either firm. [ 475H] _ ~) The appellant assessee is a new identit.i under the Act. It is not H a successor in interest of the old firm as per the provisions of the Act. [476G] MAHABIR COLD STORAGE v. C.l.T. [K. RAM
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