George Vadakkel, J.
1. For the assessment years 1966-67 to 1971-72, the petitioner-firm got the benefit of development rebate under Section 33(1) of the I.T. Act, 1961. On the ground that it transferred its assets and liabilities to one 'N.R. Trust', the second respondent, recomputing its total income during the relevant years as contemplated by Sections 34(3)(b) and 155(5) of the Act issued Exs. P-4A to P-4F revised assessment orders in respect of the years 1966-67 to 1971-72. The first respondent affirmed this on revision as per Ex. P-6 order.
'N.R. Trust' was created by Ex. P-2 trust deed dated October 27, 1971. The founder trustee therein is one of the partners of the petitioner-firm. There are 20 beneficiaries mentioned therein. They include the partners of this firm and minors admitted to its benefits and others. These beneficiaries--'agreed with the founder trustee and delivered to the said trustees all properties, furniture, machinery, stock-in-trade and other properties and chattels and book debts of the business of Radhas Printers, Quilon and Cochin ; Radhas Agencies, Quilon ; Sangam, Changanacherry ; Radhas, Kottayam ; R.K.T. Reddiar & Company, Bombay and Kunkumam Printers & Publishers, Trivandrum, and others as going concerns on and from the 27th day of October, 1971, in consideration of the said trustees agreeing to discharge the liabilities, such assets and liabilities specifically described in a separate agreement entered into for assignment up to the trustees absolutely by the respective beneficiaries who are partners or minors admitted to the benefits thereof which in effect resulted in thetransfer and assignment to the trustees, upon trust either by themselves or through their nominees the sums referred to in Clause 17 against their respective names'. Radhas Printers is the petitioner-firm. As contemplated by Ex. P-2 trust deed, the partners of the petitioner-firm by a separate deed, Ex. P-3, of the same date assigned to the trustees the assets and liabilities of the firm. The assignment was with effect from November 1, 1971. Clause 1 therein reads: '1. The vendors, as beneficial owners, have agreed to assign unto the assignees all that the goodwill of the vendors and in the business of Radhas Printers, Quilon, carried on by them in partnership and to hold the assignees and their assigns out as carrying on the said business in succession to the vendors and all book and other debts owing to them on account of the said business and all securities for the same and the benefit of all contracts and engagements made with the vendors and to which they are entitled in respect of the business hereby assigned to hold the same unto the assignees with effect from the first day of November One thousand nine hundred and seventy-one absolutely.'
2. The question for consideration, as raised by the learned counsel for the petitioner-firm, is whether Exs. P-2 and P-3 transactions involve a transfer by the firm of its assets and liabilities to the trustees.
3. There can be no doubt that the firm changed hands as a going concern from the partners to the trustees ; no doubt, one of the trustees, the founder trustee, is one of the partners of the petitioner-firm. Admittedly, the partners of the petitioner-firm and those admitted to its benefits are, along with some others, the beneficiaries as per the trust deed. However, this is not a case of a declaration of trust by will, nor one, where the author of the trust is himself the trustee, for, as per Ex. P-2 trust deed, there are three trustees. Nor is one partner by himself competent to declare a trust in respect of the partnership property. Therefore, this is a case, where it was necessary to transfer the trust property to the trustees, and was transferred as per Ex. P-3 deed.
4. In Tulsidas Kilachand v. CIT : 42ITR1(SC) , with reference to a case of a husband constituting himself a trustee for his wife in respect of certain shares held by him in some companies, the Supreme Court said (p. 6):
'The contention that there was no transfer at all in this case is not sound. The shares were previously held by Mr. Tulsidas Kilachand for himself. After the declaration of trust by him, they were held by him not in his personal capacity but as a trustee. No doubt, under Sections 5 and 6 of the Indian Trusts Act, if the declarer of the trust is himself the trustee also, there is no need that he must transfer the property to himself as trustee; but the law implies that such a transfer has been made byhim, and no overt act except a declaration of trust is necessary. The capacity of the declarer of trust and his capacity as trustee are different and, after the declaration of trust, he holds the assets as a trustee. Under the Transfer of Property Act, there can be a transfer by a person to himself or to himself and another person or persons. In our opinion, there was in this case a transfer by Mr. Tulsidas Kilachand to himself as a trustee, though there was no formal transfer.'
5. In view of what is stated above it is not necessary to examine the submissions made by the learned counsel for the revenue seeking reliance therefor on the definition clause, Section 2(47), of the Act.
6. On behalf of the petitioner, it was then contended that Sections 33(3) and (4) and 155(5) of the Act are unconstitutional. Sub-sections (3) and (4) of Section 33 provide that when two companies amalgamate, the amalgamated company shall continue to fulfil the conditions mentioned in Section 34(3), and so also, a company succeeding a firm. The bar on transfer is not by these provisions, but by Section 34(3)(b), and this provision is not impugned herein. How a striking down of Section 33(3) and (4) would advance the petitioner's case is beyond my comprehension. So long as Section 34(3)(b) stands, the attack on Section 155(5) also would be of no avail to the petitioner. The former provision says that if the machinery is transferred within the expiry of eight years from the end of the previous year in which it was acquired, any allowance made under Section 33 in respect of that machinery shall be deemed to have been wrongly made for the purpose of the Act, and the provisions of Section 155(5) shall apply accordingly. Section 155(5) confers power to recompute the total income on the basis that the allowance had been wrongly made, and to make the necessary amendment in the assessment orders. This is a procedural section, the substantive provision being Section 34(3).
7. Relying on the passage in Kanga and Palkhivala's The Law and Practice of Income Tax, 7th Edn., Vol. I, at p. 402, the learned counsel for the petitioner-firm submitted that there is no reason for singling out the two cases mentioned in Section 33(3) and (4) for favourable treatment and inflicting loss of development rebate in other cases like the one on hand where the firm, according to him, is succeeded by a trust, which, according to him, is also a case of bona fide business reorganisation. In view of what is stated in the preceding paragraph it is not really necessary to examine this submission. However, it would be useful to recall to mind the oft-repeated passage in Willis on Constitutional Law :
'In tax matters the State is allowed to pick and choose districts, objects, persons methods and even rates for taxation if it does so reasonably. The Supreme Court of America has been practical and has permitted a very wide latitude in classification for taxation.'
8. In East India Tobacco Co. v. State of Andhra Pradesh : 1SCR404 , and in Khyerbari Tea Co. Ltd. v. State of Assam : 5SCR975 , the Supreme Court has approved and recognised this principle. It should also be noted that, here, it is not a matter of imposition of tax but withdrawal of a concession, thereby making the assessee liable for tax as others.
9. In view of what is stated above I am not satisfied that the case on hand involves the determination of the constitutional validity of the provisions of Sections 33(3) and (4) or of Section 155(5) of the I.T. Act, 1961, or that such determination is necessary for the disposal of this case.
10. Dismissed. No costs.