BHAVNANI BUS SERVICE CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY its order dt. 8th March, 1963, the Tribunal has referred the following question to the High Court under S. 66(1) of the INCOME TAX ACT, 1922 :

(2.) THE assessee, M/s Bhavnani Bus Service Company, is a registered partnership firm doing the business of transporting passengers on certain routes. The firm was formed under a deed of partnership dt. 8th Oct., 1949, for a period of three years commencing from the 17th June, 1949. It was to continue thereafter at the will of the parties. The firm consisted of four partners, Tuljaram Issardas Bhavnani, Hiranand Issardas Bhavnani, Bhagwan H. Mansukhani and Mrs. Lili Mansukhani having a share of 6 annas, 4 annas, 4 annas and 2 annas, respectively. On the 29th July, 1952, a fresh deed of partnership was executed between Tuljaram Issardas Bhavnani, Hiranand Issardas Bhavnani, Sunder Singh and Mrs. Ramibai having a share of 6 annas, 4 annas, 4 annas and 2 annas, respectively. Bhagwan H. Mansukhani and Mrs. Lili Mansukhani, who were partners under the first deed of partnership, went out of the partnership and their places were taken by Sunder Singh and Ramibai. Clause 2 of the preamble of this deed recites that the partnership of the 8th Oct. , 1949, had comes to an end "by a flux of time" obviously meaning "by efflux of time". On the 14th May, 1955, a third deed of partnership was executed under which the firm consisted of two partners only, namely, Tuljaram Issardas Bhavnani and Hiranand Issardas Bhavnani, each having an equal share. It is recited in this deed that the second partnership was dissolved with effect from the 1st May, 1955. In the asst. year 1957 -58, the previous accounting year being the one ended the 30th April, 1956, the assessee sold four buses for a total consideration of Rs. 29,800. The ITO held that the written down value of these buses which were purchased in 1949 and 1951 was nil, as full depreciation had already been allowed on the buses. He, therefore, taxed the sum of Rs. 29,800 as profits of the assessee under S. 10(2)(vii) of the Act. That order was confirmed by the AAC. He rejected the contention of the assessee that the benefit of the depreciation allowed in the past years was not exclusively enjoyed by the two partners of the assessee -firm and that, therefore, the profit which accrued on sale of the buses should be allocated amongst the partners.

(3.) THIS reference which is made at the instance of the assessee came up for hearing before Mody, Acting C.J., and K. K. Desai J. on the 21st Jan., 1970, when they asked the Tribunal to submit a supplementary statement of the case "giving the facts which are already on the record of this case as to what were the written down values as computed in the various IT assessments of the four buses at the end of the first partnership and similarly at the end of the second partnership and at what price or value were these four buses taken over by the second partnership and similarly by the third partnership after the respective immediately preceding partnership ceased to exist". This was necessary because it was not clear from the judgment of the Tribunal as to which particular facts showed that the same firm was carrying on the business all throughout.