Supreme Court of India
Mahabir Cold Storage vs Commissioner Of Income Tax, Patna on 7 December, 1990
Equivalent citations: 1991 AIR 1357, 1990 SCR SUPL. (3) 469, AIR 1991 SUPREME COURT 1357, 1991 TAX. L. R. 232, 1991 (2) UPTC 1146, 1991 UPTC 2 1146, 1991 (1) SCC(SUPP) 402, 1991 SCC (SUPP) 1 402, (1990) 4 JT 754 (SC), (1991) 188 ITR 91, (1992) 1 PAT LJR 84, (1991) 91 CURTAXREP 89
PETITIONER:
MAHABIR COLD STORAGE
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, PATNA
DATE OF JUDGMENT07/12/1990
BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
KULDIP SINGH (J)
CITATION:
1991 AIR 1357 1990 SCR Supl. (3) 469
1991 SCC Supl. (1) 402 JT 1990 (4) 754
1990 SCALE (2)1226
ACT:
Income Tax Act, 1961--Section 31(1)--Development rebate
entitlement to unity of ownership and use of asset in busi-
ness not to be disrupted.
HEADNOTE:
The appellant-assessee is a registered firm. It started
functioning w.e.f. May 3, 1956 at Purnea as the branch
office of the partnership firm M/s Prayagchand and Hanuman-
mal Periwal with its Head Office at Calcutta. The firm
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 assist-
ance. The newly constituted partnership 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
installed machinery of the value of Rs.5,80,055 in Sri
Mahabir Cold Storage. For one reason or the other develop-
ment rebate on the capital asset, namely, the machinery, was
not claimed till the assessment year 196263 in which year
the appellant claimed development rebate. The Income-tax
Officer, and on appeal the Assistant Appellate Commissioner,
disallowed the claim on the finding that the new firm 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
firm of M/s. Prayagchand Hanumanmal with a change in the
constitution, and the continuity of the 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 partner-
ship firm which itself
470
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.
Before this Court it was inter alia contended that (i)
M/s. Prayagchand Hanumanmal consisting of original partners,
had taken M/s. Periwal and Co. merely 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
taking as new partner M/s Periwal and Co. (Pvt) Ltd. for the
purpose of benefit of profits only, and hence the assessee
was entitled to the development rebate under section 33 of
the Income-Tax Act.
On befall of the Revenue it was contended that the
appellant was not "the assessee", nor the owner of the
machinery and plant; the owner was M/s. Prayagchand Hanuman-
mal and as such the assessee was not entitled to the devel-
opment rebate.
Dismissing the appeal, this Court,
HELD: (1) Under both the repealed Act as well as the
1961 Act two conditions precedent were required to be ful-
filled 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 the business
carried on by him. There must exist unity of ownership and
use in the business. [475A, 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 fulfilled, is
entitled to the benefit. [475G]
(3) When the unity of ownership and use of the asset in
the business is disrupted or a branch of an earlier business
is taken over by a new rum which exists simultaneously with
the other branches of the old business, the benefit of
development rebate under Section 33(1) does not extend to
either firm. [475H]
(4) The appellant assessee is a new identity under the
Act. it is not a successor in interest of the old firm as
per the provisions of the Act. [476G]
471
(5) Section 33(1) gives right to development rebate only
to the owner who has acquired the ship or installed the
machinery or plant. The necessary implication is that the
assessee who claims development rebate should continue to
remain to he the owner of the ship or plant or machinery
during the relevant previous assessment year/years and the
owner alone is entitled to the development rebate till it
becomes nil. [476H-477A]
JUDGMENT:
