Law:

Section:

Section 41(2), read with section 256 of the Income-tax Act, 1961 - Balancing charge - Assessee transferred his petrol tanker to partnership firm of which he was partner and its value was credited in firm's books to his capital account - Tribunal held that this transaction did not amount to sale and difference between written down value of tanker and amount received by assessee from firm was not profit assessable under section 41(2) - Whether Tribunal was justified - Held, yes - Whether any question of law arose from Tribunal's order - Held, no Section 256, read with section 41(2) of the Income-tax Act, 1961 - Reference - Question of fact - Whether in view of facts stated under heading 'Balancing charge', any referable question of law arose from Tribunal's order - Held, no FACTS The assessee transferred his own petrol tanker to a partnership firm in which he also became a partner. The value of the tanker was credited in the firm's capital account in the assessee's name. The ITO held that the transaction amounted to sale of the tanker by the assessee to the partnership firm and added the profit calculated under section 41(2) to the assessee's total income. On appeal, the AAC deleted the addition on the ground that the transaction did not amount to sale. The Tribunal confirmed the AAC's order, and refused to make a reference under section 256(1) as the point involved was well settled by the Supreme Court's decision. On application under section 256(2): HELD In order to attract the provisions of section 41(2), the building, machinery, plant or furniture should be sold, discarded, demolished or destroyed. In view of the Supreme Court's decisions in the cases of Addanki Narayanappa v. Bhaskara Krishnappa AIR 1966 SC 1300, CIT v. Hind Construction Ltd. [1972] 83 ITR 211 and Malabar Fisheries Co. v. CIT [1979] 120 ITR 49, it is well settled that in the case of a transfer of an asset by an assessee to a partnership firm in which the assessee himself is a partner, there is no element of sale involved, as the partnership firm is a composite body consisting of the partner himself along with other partners and a person could not transfer or sell property to himself. As…

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