Law: Income Tax Act, 1922

Section: 10(2)

Section 33 of the Income-tax Act, 1961 [Corresponding to section 10(2) of the Indian Income-tax Act, 1922] - Development rebate - Assessment year 1959-60 - Petitioner company consisted of only three shareholders who separately entered into an agreement of partnership under which some transport vehicles were to be transferred to said firm - Revenue indicated proceedings for disallowing amount of development rebate allowed on these vehicles during assessment of relevant year - Whether it way only to prevent misuse of provision of concession of development rebate, legislature had prohibited selling of machineries and plants to third party while permitted same in favour of Government - Held, yes - Whether there was no discrimination because it is open to legislature to put Government and ordinary assessee in two different groups and thus section 10(2)(vib) is constitutionally valid - Held, yes - Whether assets transferred in instant case would be covered by expression 'sold or otherwise transferred' and it would come within ambit of section 10(2)(vib) - Held, yes - Whether development rebate allowed to company was to be called back - Held, yes FACTS The father and his two sons owned all the shares of the assessee-company carrying on the business in motor transport and obtained certain development rebate. These persons entered into a separate partnership agreement. Pursuant to the terms of the partnership, some of the transport vehicles, in regard to which rebate was granted, were transferred by the company to the partnership. This led the ITO to act under section 35(11) to recomputed the total income of the company for disallowing rebate already allowed during assessment. On writ petition company contended that there was no sale or transfer within the contemplation of the proviso to section 10(2)(vib); and (ii) that the proviso is violative of the equality clause enshrined in article 14 of the Constitution. HELD The expression 'sold or otherwise transferred' intended to cover all situations and not to be confined to sales. Even if the word 'transferred' was not there, the instant case would come within the ambit of the clause having regard to the fact that there…

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