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Commissioner of Income-tax Vs. Amber Corporation - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference No. 26 of 1972
Judge
Reported in[1981]127ITR29(Raj)
ActsIncome Tax Act, 1922 - Sections 10(2); Indian Partnership Act, 1932 - Sections 14; Transfer of Property Act, 1882
AppellantCommissioner of Income-tax
RespondentAmber Corporation
Appellant Advocate S.M. Mehta, Adv.
Respondent Advocate H.P. Gupta, Adv.
Cases Referred and Sudhansu Kanta v. Manindra Nath
Excerpt:
- .....earlier to it, i.e., on march 18, 1957, the maharaja made a gift in favour of his four sons. the partnership firm came into existence with effect from december 4, 1957; by means of a partnership deed dated april 14, 1957. the rambagh palace with the land appurtenant thereto was valued at rs. 25 lakhs. the four sons of the maharaja brought in the building (the said palace and the land appurtenant thereto) as their contribution of the capital to the firm along with cash of rs. 25,000 each. the maharaja contributed his share of capital in the form of furniture and cash amounting to rs. 1,71,388.4. in the assessment year 1961-62, the assessee claimed depreciation on the said building. the ito concerned took the view that no transfer of the immovable property consisting of the building and.....
Judgment:

Kasliwal, J.

1. A Division Bench of this court gave a direction to the Income-tax Appellate Tribunal (Delhi Bench 'B') to state the case and refer the following questions of law for the opinion of this court:

'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the deed of partnership of which the four of the partners contributed immovable property known as Rambagh Palace as their contribution towards the assets of the partnership did not require registration?

2, Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to depreciation under Section 10(2)(vi) of the Indian Income-tax Act, 1922, in respect of the aforesaid Rambagh Palace?'

2. In pursuance of the aforesaid order of this court, the Income-tax Appellate Tribunal has sent a statement of the case.

3. The facts in brief, as pointed out in the statement of the case, are that M/s. Amber Corporation, hereinafter referred to as 'the assessee', was a firm consisting of five partners, namely, the late H.H. Sawai Man Singhji of Jaipur and his four sons. The partnership was formed to carry on hotel business at Jaipur in December, 1957. A few months earlier to it, i.e., on March 18, 1957, the Maharaja made a gift in favour of his four sons. The partnership firm came into existence with effect from December 4, 1957; by means of a partnership deed dated April 14, 1957. The Rambagh Palace with the land appurtenant thereto was valued at Rs. 25 lakhs. The four sons of the Maharaja brought in the building (the said palace and the land appurtenant thereto) as their contribution of the capital to the firm along with cash of Rs. 25,000 each. The Maharaja contributed his share of capital in the form of furniture and cash amounting to Rs. 1,71,388.

4. In the assessment year 1961-62, the assessee claimed depreciation on the said building. The ITO concerned took the view that no transfer of the immovable property consisting of the building and the land was made in accordance with the Transfer of Property Act to the firm. The ITO was, therefore, of the view that the assessee was not entitled to claim depreciation on the said building. On an appeal having been preferred by the assessee, the AAC, vide his judgment dated August 31, 1968, reversed the order of the ITO. Aggrieved by the order of the AAC, the revenue filed an appeal before the Appellate Tribunal. Before the Appellate Tribunal, it was argued on behalf of the revenue that in the absence of registration of the transfer in favour of the firm no title to the building passed to the firm, and that the latter was not entitled to be allowed depreciation. The Tribunal relied on a judgment of this court in CIT v. Amber Corporation and held that in the case of the assessee itself for the assessment years 1959-60 and 1960-61, the High Court had already taken the view that the assessee was entitled to the depreciation in the facts and circumstances of the case. As regards the other question mentioned above as question No. 1, the High Court in the above case placed reliance on Firm Ram Sahay Mall Rameshwar Dayal v. Bishwanath Prasad, : AIR1963Pat221 and Sudhansu Kanta v. Manindra Nath, : AIR1965Pat144 but held that they need not decide this point finally as it was not referred to them, and it was even contrary to the facts which were mentioned in para. 3 of the statement of the case, before them. The revenue then moved an application before the Tribunal for referring the above-mentioned question of law for the opinion of this court. The Tribunal in its opinion thought that there was no question of law arising in the case and, as such, dismissed the application filed by the revenue. The Commissioner of Income-tax, Rajasthan, Jaipur, in the above circumstances, submitted an application before this court for giving a direction to the Tribunal for stating a case and referring the above question of law for the opinion of this court. This court allowed the application and gave a direction to the Tribunal to state a case and refer the above question of law for the opinion of this court.

5. As regards question No. 2 referred for our opinion, suffice it to say that a Bench of this court in CIT v. Amber Corporation has already given its opinion and has answered the question in the affirmative. The above case was between the same parties and was with respect to two earlier assessment years, viz., 1959-60 and 1960-61. Mr. Mehta, learned counsel appearing for the revenue, has also frankly conceded that as regards this question, the earlier decision given by this court between the parties is binding as the revenue did not file an appeal before the hon'ble Supreme Court of India against the decision of the Rajasthan High Court. In these circumstances, we are in conformity with the view taken by this court in the decision given in C1T v. Amber Corporation and the question is answered in the affirmative.

6. Now remains question No. 1 for our determination. Mr. Mehta, learned counsel for the revenue, has contended that the transfer of the share by one of the partners in the firm consisted of an immovable property which under the Transfer of Property Act, being admittedly for a value more than Rs. 100, required registration. It is contended that in the absence of registration no such transfer could be given effect to, and the property known as Rambagh Palace cannot be considered to have been contributed towards the assets of the partnership in the absence of registration, It is, thus, contended that the question of depreciation on such property does not arise at all and the same cannot be taken into consideration. On the other hand, Mr. Gupta, learned counsel for the assessee, has contended that the transfer is not required to be registered under the Indian Registration Act. There was no provision under the Partnership Act or under the Indian Registration Act requiring such transfer to be registered. It was not a transfer at all under the provisions of the Transfer of Property Act. Reliance is placed on Firm Ram Sahay Mall Rameshwar Dayal v. Bish-wanath Prasad, : AIR1963Pat221 and Sudhansu Kanta v. Manindra Nath, : AIR1965Pat144 .

7. Section 14 of the Indian Partnership Act reads as under:

'14. Subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.

Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.'

8. Thus, from the reading of the above provision it would be quite clear that all property and rights and interests which the partners may have brought into the common stock as their contribution to the common business are parts of the partnership property. Even if a property contributed by one partner be an immovable property, no document registered or otherwise, is required for transferring the property to the partnership. We are in agreement with the view taken by the Patna High Court. This court also, as already observed above, in CIT v. Amber Corporation approved the above decision of the Patna High Court, though the point was not directly for decision before them. In the circumstances mentioned above, in our view, the question No. 1 is answered in the affirmative.

9. In the facts and circumstances of the case, the parties arc left to bear their own costs.


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