Law:

Section:

Section 155 of the Income-tax Act, 1961 (Corresponding to section 35(11) of the Indian Income-tax Act, 1922) - Rectification of mistakes - Other amendment - Assessment year 1964-65 - Whether distribution of surplus of assets of a partnership on its dissolution does not amount to transfer of assets of firm - Held, yes - Whether when assets are distributed among partners at time of dissolution, it cannot be said to amount to utilisation of machinery in sense in which word "utilised" has been used in section 35(11)(ii)(c) of Act of 1922 - Held, yes - Development rebate allowed to petitioner partnership firm in assessment years 1960-61 and 1961-62 was sought to be withdrawn under section 155(5) on dissolution of said firm on 31-8-1963 and on distribution of assets amongst partners on ground, that petitioner had otherwise transferred machinery in question before expiry of statutory period of eight years under section 34(3)(b) of 1922 Act - Whether there was no 'transfer' of any asset nor there was any utilisation of machinery as each partner got what he along with other partners was joint owner during subsistence of partnership - Held, yes - Whether, therefore, orders of rectification disallowing development rebate allowed in assessment years 1960-61 and 1961-62 were contrary to provisions of law and hence must be quashed and set aside - Held, yes FACTS The petitioner in this case was, prior to its dissolution on 31-8-1963, a partnership firm registered under the provisions of the Indian Partnership Act. Though the firm had been dissolved with effect from 31-8-1963, as the subject-matter of the writ petition was pending, the said firm was deemed to continue in connection with that subject-matter. All the partners of the petitioner-firm were citizens of India having their domicile in India. The business of the petitioner-firm was to manufacture hosiery goods and sell the same. In the financial years 1959-60 and 1960-61, corresponding to the assessment years 1960-61 and 1961-62, the petitioner firm had purchased some new machinery for purpose of its business. The ITO, while assessing the petitioner-firm for those assessment years, had allowed development rebate to the…

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