Case: Chittoor Motor Transport Company Private Limited Vs. Income Tax Officer, Chittoor

1. This is an appeal by certificate of the High Court of Andhra Pradesh against its judgment dismissing a petition filed under Art. 226 of the Constitution by the appellant. The appellant is a Private Limited company, hereinafter referred to as the Company, and three persons hold shares of the Company as under:Sri C. P. Sarathy Mudaliar 279727,970Sri C. P. Singaram 4204,200Sri C. P. Doraiswamy 5005,000C. P. Sarathy Mudaliar 25,000C. P. Singaram 10,000C. P. Doraiswamy 10,000On June 30, 1959, the Company passed a resolution transferring a number of motor buses, including the four in respect of which development rebate had been claimed, to the partnership firm for a sum of Rs. 2,52.000. The company was not wound up and is still in existence and carrying on business as a transport company. On February 7, 1962, the Income-tax Officer, purporting to act under S. 35 (11) of the Income-tax Act. 1922, hereinafter referred to as the Act. Issued a memorandum to the appellant stating, inter alia, that"since the assets were transferred within 10 years I propose to invoke the provisions of S. 35 of the Act and rectify the income by including the rebate allowed as income of the assessee."He invited the assessee to give his objections if any. The appellant thereupon filed a petition in the High Court on February 19, 1962, praying inter alia that the Income-tax Officer be prohibited from proceeding with the rectification of the Income-tax assessment for 1959-60, as per the memorandum dated February 7, 1962. Two points were taken in the petition: First that S. 10 (2) (vib) of the Income-tax Act was repugnant to Art. 14 of the Constitution; and, secondly, that assuming that S. 10 (2) (vib) was intravires, this transaction did not amount to a sale or transfer2. TheHigh Court held that Section 10 (2) (vib) was not repugnant to Art. 14 of the Constitution, and that the transaction amounted to transfer within S. 10 (2) (vib).

Reasoning: In our opinion, there is no discrimination which is hit by Art. 14 of the Constitution in this case. The Legislature has directed the giving of a rebate on conditions which are exactly the same for every assessee, one condition being that if the assessee sells before the expiry of ten years from the end of the year in which it was acquired, to a person other than the Government, he would forfeit such rebate. This condition is applicable to every assessee and an assessee has a choice of either selling to a person other than the Government and forfeiting the rebate or selling to the Government and keeping the rebate with himself. The discrimination, if any, arises on the choice made by the assessee. The Legislature perhaps presumes that if the machinery is offered to the Government for sale, the Government will only buy it at a price which will take into consideration the rebate taken by the assessee. In our opinion, therefore, it has not been established that S. 10 (2) (vib) violates Art. 14 of the ConstitutionIf we look at the resolution, dated June 30, 1959, it is quite clear that it is a sale for consideration of a number of buses by the limited company to the partnership. It would be a sale under the Sale of Goods Act and it would be a sale in any other proper meaning which might be given to the word sale. We are not concerned whether any profit resulted to the assessee but what we are concerned with is whether the assessee had sold or transferred these buses to the partnership. To us the answer seems to be plain that whether the transaction resulted in profit to the company or not, the transaction comes within the purview of the latter part of S. 10 (2) (vib).