Law: Transfer of Property Act, 1882

Section: 53

Transfer of Property Act (IV of 1882)--S. 53--Applicability--Income-tax--Transfer of assets to avoid payment--Assessee selling all properties and discharging all other debts pending re-opening of assessments--Government cannot claim transfer of such properties etc. to be invalid as effected with intent to defeat or delay Governments claim. JUDGMENT R.S. PATHAK, J.--This appeal by special leave arises out of a suit instituted by the appellant for a declaration that sale-deeds of immovable properties and transfer of movables belonging to the respondent limited company in favour of the respondent firm are invalid, inoperative and not binding on the appellant and other creditors of the respondent limited company. A suit was instituted by the Union of India the appellant before us, alleging that the Krishna Oil Mills and Industries Ltd. a public limited company registered under the Indian Companies Act, 1913, was carrying .on business in the manufacture and sale of tin cans and aerated water. If entered into a partnership in September, 1952, with Rajeswari and Co., which was carrying on business in the pressing of cotton bales. Under the partnership agreement, Rajeswari & Co. was to install a cotton baling press in the buildings of the company and the business would be carried on under the name Rajapalayam Cotton Pressing Factory, with the profits being divided between the company and Rajeswari & Co. in. the ratio of 7 to 9, respectively. This was replaced by another agreement in 1954, but the business was carried on in the same name and the profits divided in. the same ratio. It was, alleged that the company incurred losses in its own business year after year and from 1954, the only income derived by it flowed from the shares held by it in the partnership business. It was alleged that the company had in fact ceased to carry on its own business, but in computing the income of the company from the assessment year 1956-57 to the assessment year 1959-60, the losses suffered during the previous years from the companys own business were allowed to be carried forward and set off against its share of income from the partnership firm. Subsequently, the Income-tax…

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