Law:

Section:

JUDGMENT Untwalia, CJ.-This is a reference under section 256(1) of the Income-tax Act, 1961 (hereinafter called "the 1961 Act"), made by the Income-tax Appellate Tribunal, Patna Bench, on the following question of law: "Whether, in the facts and circumstances of the case, the order of the Tribunal holding that the conditions under section 33(1) of the Income-tax Act are satisfied, is legal and proper?" At the outset I may state the facts from the statement of the case. The assessee in this case is Mahabir Cold Storage, Purnea. It is a registered firm and derives income from business of cold storage. Originally, Prayagchand Periwal and Hanumanmal Periwal started a partnership business under the name and style of M/s. Prayagchand Hanumanmal with the head office at Calcutta and a branch office at Purnea. The said partnership was started with effect from May 3, 1956. The branch office at Purnea of the same partnership carried on business under the name and style of Shri Mahabir Cold Storage. The two partners took loan from a private limited company named Periwal and Co. (P.) Ltd. for the erection and running capital of the cold storage. Subsequently, the company aforesaid was taken as a partner for better management and financial assistance for business of cold storage at Purnea. A fresh partnership deed was executed on November 10, 1958. According to this deed, Prayagchand had 25% share, Hanumanmal also had 25% share and the private limited company was allotted 50% share in the profits of the newly constituted partnership. This newly constituted partnership of Shri Mahabir Cold Storage was granted a separate registration under section 26A of the Indian Income-tax Act, 1922 (hereinafter called "the 1922 Act"). It was separately assessed for the assessment year 1960-61 and thereafter. The original firm consisting of the two partners, Prayagchand Periwal and Hanumanmal Periwal, had installed machinery of the value of Rs. 5,80,055 in the accounting year relating to the assessment year 1959-60. After the new partnership firm came into existence with three partners from November 11, 1958, it claimed development rebate in the assessment year 1959-60 in respect of the…

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